Pension Indicator Updated for October 31, 2019

Time to Give Thanks

 By: Matthew Klein, Principal, Findley

November is always associated with Thanksgiving, and in the spirit of giving thanks, how about we show some love for pension plans?

Of course the detractors will call them “dinosaurs” but the venerable pension plan still has a place in today’s world. Even now, tens of millions of Americans rely on the safety that a monthly deposit gets made into their bank account every month. Grandma doesn’t need to worry about how to invest, where to invest, or how much or how little to withdraw from her nest egg because the pension plan provides guaranteed income for life.

There are numerous reasons why pension plans have fallen out of favor in the corporate world and we’re not going to delve into that here, but a quick internet search reveals there are no shortage of articles that speak to a looming retirement crisis. Far too many Americans work in jobs with no retirement plan, either defined benefit (DB) or defined contribution (DC). Forget Grandma, for many of those with access to a defined contribution plan, many employees do not have the financial literacy to knowledgeably undertake the brunt of the investment, inflation, and longevity risk their employee directed retirement program entails.

This naivety can lead to a wide array of decisions which may negatively impact their account balances at retirement, including but not limited to:

  • Not participating in the program at all
  • Contributing less than the amount of employer match
  • Electing to take heavily taxed cash contributions after leaving the employ of the company
  • Taking out loans against their retirement account balances

Bottom line, not enough employers offer a retirement package, and employees aren’t disciplined or knowledgeable enough to take full advantage of one when they have a chance.

So we raise a glass to the pension plan, the best retirement design for workers ever created. We hope that society learns a lesson and remembers how much financial sense these designs provide.

As always, thanks for reading, and drop us a comment on how we're doing.

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For more information on the development of the Pension Indicator, please see our Disclosure document.

Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results.

Year to Date Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -0.3% 0.0% 1.8% 3.8%
 Recently Frozen -4.3% -4.1% -2.3% -0.4%
 Ongoing Traditional -8.3% -8.1% -6.5% -4.5%
 Cash Balance -1.4% -1.1% 0.7% 2.7%
Month-over-Month Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) 1.2% 0.9% 0.7% 0.3%
 Recently Frozen 1.3% 1.0% 0.8% 0.4%
 Ongoing Traditional 1.4% 1.1% 0.9% 0.5%
 Cash Balance 1.2% 0.9% 0.7% 0.3%
12-Month Change Investment Mix 
Plan TypeGrowthBalancedLDI LiteLDI
 Frozen (for several years) -2.6% -1.0% 2.5% 6.6%
 Recently Frozen -7.2% -5.7% -2.4% 1.5%
 Ongoing Traditional
-11.9% -10.4% -7.3% -3.6%
 Cash Balance -3.8% -2.2% 1.1% 5.2%

Frozen Plan 7 31

Recently Frozen Plan 7 31

Ongoing Plan 7 31

Cash Balance 7 31

Disclosure

FINDLEY

 

Findley is an independent consulting firm and trusted business partner. We help you make critical decisions about employee benefits, compensation, and change management to make sure your human resources strategy aligns with organizational objectives. We provide strategic counsel to help navigate the changing benefits landscape and successfully manage workforce issues.

 

 

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 Clearstead is a leading institutional and private client advisory firm.  We are relentless in providing superior solutions so clients can exceed their aspirations, and build stronger legacies for their families, their communities, and themselves.  We do so with our authentic, steadfast, and innovative employee and board-member owned firm of nearly 80 professionals who work to tackle complex investment, financial, tax, and governance needs of our institutional and private clients.