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Greece received a financial bailout this week from the European Union and International Monetary Fund.  A large part of the bailout comes from funds contributed by you, the taxpayers of the United States, through the monies committed to the IMF by President Obama.  On Monday, Greece’s cabinet approved a sweeping overhaul of the country’s debt-ridden pension system.  It is part of a package of austerity and reform measures designed to be implemented over the next three years.  

The government is expected to introduce legislation to Parliament later this week.  After debate, a vote is expected at the end of May.  Legislation is expected to propose several changes, some of which are outlined below.


Pension reforms include a gradual raising of the minimum retirement age for early retirement to age 60.  Plans are in effect for the general retirement age, to be lifted to age 65 after another 10 years.

Plans are in place to lower the pension benefits of wealthier retirees and experts warn that Greece’s pension system is facing possible bankruptcy.  According to Labor Minister Andreas Loverdos, “The system faced collapse after 2011,” and “Inaction would have meant no pensions.”

Watch these legislative proposals carefully as they may provide insight into what will be coming to America’s Social Security program in the intervening years.

Last fall, the federal corporation charged with protecting many Americans’ private retirement funds issued an ominous public warning: the amount of pensions at risk inside failing companies had more than tripled during the recession.  The Pension Benefit Guaranty Corporation’s announcement stunned many retirement fund experts when they indicated that tens of billions of new dollars may be required to rescue traditional pensions paid by U.S. firms whose economic collapse left them unable to meet their retirement obligations to workers.

In November 2009, the PBGC announced that it had been cited for “material weakness” in its audit.  That is “Fedspeak” (a deliberate dressing-up and clouding of simple everyday terms into a code that is difficult to understand) for having received the accounting equivalent of an F in its audit.  One of the terrible conclusions we must draw is that the governmental agency mandated with cleaning up failed companies assets and rescuing workers’ pensions is in serious financial trouble itself.  A second conclusion is that these workers’ pensions could be in serious jeopardy.

Why this huge problem?  One reason is that PBGC has been inundated by new participants and their primary responsibility is to make sure those people get paid.  In short, PBGC has been swamped from the intake processes that have diverted many of their financial resources.  Other reasons include mismanagement, unethical practices, and “apparent dishonesty” in erroneously reporting it had implemented solutions to past problems.

Is this a harbinger of what is to come to your pension plan, or a company in your city, town, or county?   While many would dismiss this as a small problem, consider that, nearly one in six Americans relies on the PBGC to guarantee the pensions for which they’ve worked a lifetime to enjoy.

What are the likely results of this ominous situation?  The answer seems to lie in a simple dichotomy:  either a series of government bailouts or a situation where millions of pensioners take substantial losses in their retirement accounts.

     
This is not an exclusively American problem.  Many European nations are facing the same results including:  Great Britain, France, Spain, and Greece to name a few.  Retirement funds have dwindled to the point that governments are raising retirement ages in their countries.  This unpleasant certainty may also be played out in America’s Social Security program or the time will come when benefits will have to be adjusted downward.

What is the major lesson to be learned from this tragic situation?  Widely diversify your retirement funds and participate in a variety of financial arrangements when it comes to your retirement nest egg. 

Last fall, the federal corporation charged with protecting many Americans’ private retirement funds issued an ominous public warning: the amount of pensions at risk inside failing companies had more than tripled during the recession.

The Pension Benefit Guaranty Corporation’s announcement stunned many retirement fund experts when they indicated that tens of billions of new dollars may be required to rescue traditional pensions paid by U.S. firms whose economic collapse left them unable to meet their retirement obligations to workers.

In November 2009, the PBGC announced that it had been cited for “material weakness” in its audit.  That is “Fedspeak” (a deliberate dressing-up and clouding of simple everyday terms into a code that is difficult to understand) for having received the accounting equivalent of an F in its audit.  One of the terrible conclusions we must draw is that the governmental agency mandated with cleaning up failed companies assets and rescuing workers’ pensions is in serious financial trouble itself.  A second conclusion is that these workers’ pensions could be in serious jeopardy.

Why this huge problem?  One reason is that PBGC has been inundated by new participants and their primary responsibility is to make sure those people get paid.  In short, PBGC has been swamped from the intake processes that have diverted many of their financial resources.  Other reasons include mismanagement, unethical practices, and “apparent dishonesty” in erroneously reporting it had implemented solutions to past problems.

Is this a harbinger of what is to come to your pension plan, or a company in your city, town, or county?   While many would dismiss this as a small problem, consider that, nearly one in six Americans relies on the PBGC to guarantee the pensions for which they’ve worked a lifetime to enjoy.

What are the likely results of this ominous situation?  The answer seems to lie in a simple dichotomy:  either a series of government bailouts or a situation where millions of pensioners take substantial losses in their retirement accounts.

     
This is not an exclusively American problem.  Many European nations are facing the same results including:  Great Britain, France, Spain, and Greece to name a few.  Retirement funds have dwindled to the point that governments are raising retirement ages in their countries.  This unpleasant certainty may also be played out in America’s Social Security program or the time will come when benefits will have to be adjusted downward.

What is the major lesson to be learned from this tragic situation?  Widely diversify your retirement funds and participate in a variety of financial arrangements when it comes to your retirement nest egg. 

Beth Flynn, Vice President of Retirement and Client Experience of Charles Schwab &

Co., Inc. has published an article on the top five retirement myths many people believe.

It is very informative and worth your consideration.

Beth Flynn’s top five retirement myths:

1.    You'll only need 70-80 percent of your pre-retirement income.
Work-related costs go away when you retire, and the kids are hopefully financially independent. But other expenses can take their place, such as health care (particularly if you retire before 65, the age when Medicare kicks in), increased travel and leisure, etc.

2.    When you retire, you'll be in a lower tax bracket.
Even workers in higher brackets may find that Social Security income, pensions, taxable portfolio income and retirement account distributions combine to keep them in the same or an even higher bracket in retirement.

3.    You can always just keep working.
Part-time or even full-time work at something you enjoy can be a fulfilling way to generate extra retirement income and social interaction. But, that presumes both you and the job market for seniors remain healthy.

4.    The stock market will save you.
For long-term planning, it's smart to plan on high single-digit equity returns and about half that for bonds. Also, don't assume the same return every year. Market returns (even real estate) fluctuate from year to year.

5.    There's always Social Security.
With Social Security, it's especially hard to separate truth from fiction. According to some, the status quo is fine. Others see bankruptcy as imminent. The Social Security Administration projects that the current system is sound through 2040, but beginning in 2041 benefits could be reduced by 26% and could continue to be reduced annually.

Keeping these five things in mind as you plan your retirement can make your retirement experience a much more rewarding and less stressful chapter in your life.