Is Your Pension Plan Healthy?

By Al Thomas

Good news! Interest rates are going up. I bet your pension plan (if you are lucky enough to have one) has a lot of bonds in it.

When interest rates go up it means the principle amount of the bond is going down. The fund manager knows this and hopes you wonít ask. Nation wide bonds are offered at .85. If the bonds in your pension plan were bought at par (100) your bonds have lost 15%.

If you have Detroit bonds they are close to worthless. Or that California city. Or look at the discount on Philadelphia municipal bonds. Not a pretty picture.

Firemen, policemen, county employees that have paid in about 7 Ĺ% of their before tax earnings may not get even part of what they paid. Also remember the employer paid in an equal amount. Who promised you that you were going tro retire on full salary?

Some politician and your so-called bargaining agent made promises they KNEW could not be kept. Yes they did. But it bought your vote.

Isnít it time you asked your pension manager if your pension is fully funded? He has to tell you. It belongs to you Ė not him.

Letís clarify ďunder fundedĒ. It means they donít have enough money or projected earnings on current assets in the plan to meet obligations made to those in the pension plan. They are paying current folks, but they are stealing from the funds assets that are there to pay pensioners in the future. Hate to tell you this, but there wonít be enough or maybe any when you line up at the retirement pay window. During an economic slowdown (like now) bonds usually get hurt.

Stockton, California is broke. No money. They donít have enough cash to keep the cops on the street or the firemen to answer emergencies. I will bet there is no money in their pension plans either.

Scranton and Harrisburg, Pennsylvania are broke and others are standing in line to follow. Is your city promising you more than it can deliver?

It is best to cut back on contracts now that can deliver your pension than promises that will go broke and leave you with nothing. And be sure your politician takes a cut in his salary. He can still be a big shot, but not at your expense.

The welfare programs should have a cut also. I donít know about you, but it makes me mad when I see a welfare recipient driving a new car and with a fancy new i-phone and special fingernails. It seems welfare is a lot better than working for a pension.

Before it is too late now is the time to check on your pension plan to see if it is in good health.

Copyright 2013 Williamsburg Investment Co. All rights reserved. Al's new ebook (32 pages) is available on Amazon.com for 99 cents. It explains the Golden Cross and the Death Cross. These are well known methods of determining long term trends in the market. If you only learn one method of technical analysis this would have kept you out of the 2000 and 2008 crashes and will keep you out of the next one that is coming soon. The title is Never Lose Money In The Stock Market Again.