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A USA Today report recently revealed that General Motors pension plan is underfinanced by roughly $20 billion. The benefits retirees could receive is in serious peril. GM is discussing with the Treasury to decrease some retiree benefit obligations by approximately two-thirds.
Global share markets have lost billions of dollars, as they continue to remain unpredictably volatile. Real estate has plummeted world-wide. Long term goals for superannuation funds have been devastated.
According to a recent publication by Wharton School, United States, “Retirement accounts have lost from $2 to $4 trillion, as stocks have tumbled nearly 50 percent from their peak in 2007.” Both private and public pensions are now billions of dollars short of their minimum requirements.
The recent losses have soundly shaken financial experts. Personal retirement plans are in shambles. Governments are globally facing the harsh decisions of how to make up the short fall, such as raising taxes, on already stressed taxpayers.
Head of TNS Finance UK, Sharon Rees, says “The UK is entering a state of pension meltdown.”
Hymans Robertson’s recent survey showed that 7 out of 10 people polled believed they weren’t saving enough for retirement, with a staggering 83% of 16-24 year olds in agreement.
The average life expectancy has increased to 79 years for males and 84 for females. In an Austin Business Journal survey it shows there is a reduction in the number of people who believe they will have enough money to live comfortably just five years into retirement. In the UK alone, the recession has postponed the retirement plans of 1.85 million people. Only 44% feel comfortable that their retirement plans are secure.
The responsibility of gathering retirement income is moving from the employer to the employee. Some employers are finding it difficult to maintain their contribution levels, while others are reducing, or stopping them entirely.
Alicia H. Munnell, director of the Center for Retirement Research at Boston College, testified to the U.S. Congress in February, “Even before the financial crisis, we have been concerned about the ability of 401(k) plans to provide secure retirement income. In other words, defined contribution retirement plans place money management and investing in the hands of people who really don’t, on the average, have the specialized financial knowledge, or skills necessary, for making the best decisions about investment and retirement income".
“The Detour on America’s Road to Retirement,”
Many people are either going to have to accept a lower standard of living, or work longer than expected. Everyone is going to have to do what they can to supplement their super.
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