Retirement: Live Long and Work

Posted by: Howard Silverblatt on July 6, 2010

If you are planning to retire soon, think again. Retirement, it appears, is only for the few, the rich or the benefit endowed. The stats of both Corporate Pensions and OPEB (Other Post Employment Benefits) is somewhere between dismal and don’t ask because I don’t want to know. Via the link below, is my annual S&P 500 P&O review. There are two bottom lines here. First, given reduced benefits, reduced personal and retirement accounts, and increased retiree longevity, workers who have a choice will delay retirement, change lifestyles, and accept that retirement as they envisioned it may not exist. And second, while pensions remain significantly underfunded, the record level of cash held by S&P 500 companies makes the financial obligation a business item, not a retiree problem; but the retiree now has to worry about reduced benefits.

The 34% global market rebound of 2009 only slightly improved S&P 500 pensions, as underfunding improved to a US$ 261 billion short fall from a short fall of US$ 308 billion. Pension funding rate increased to 81.65% from 78.10%. Discount rate declined to 5.81% from 6.29%. Expected return rate declined to 7.83% from 7.95%.
Laid-off workers, who otherwise might have remained with their employers, have added additional unanticipated expenditures to pensions as early retirees.
The shift back to equities from the safety of fixed income helped in 2009, but the current pullback shows the dangers. Funds want safety and companies want returns (less contributions).
OPEB underfunding remains massive, even as underfunding was reduced to US$ 215 billion from US$ 257 billion.
Only 18 issues were overfunded in pensions for 2009 compared to 296 issues ten-years ago. Only four issues were overfunded in OPEB in 2009, with just one of those issues overfunded in both pensions and OPEBs.
For details see the full report
pensions_opeb_20100706.doc

Reader Comments

Håkan

July 6, 2010 7:07 PM

This is nothing new. Many retirement accounts have been, more or less, shrinking or stagnant since tech crash of 2000! That's 10 years. WAKE UP PEOPLE!

mark Hicks

July 7, 2010 1:44 AM

we all have to retire but that should not stop us from being productive. Though the governemt promises help to retirees, you should not rely on it at all times for it could go broken. While we receive lump sum from our pension benefits, it will all be gone soon so retirees make some money out of that cash. Just be very careful how you manage.

Clyde

July 7, 2010 4:08 PM

Sounds like a great plan, if you can find a steady job. I am already retired now, just not by choice. Where are all the Jobs? At 38, with a Masters degree and 10 years experience in engineering, I would like to just find a steady job in the USA, at this point in my life. Wonder how marketable I will be at 65 or 70 or beyond? If I can find a stressful job maybe I will die from a early heart attack in my 50s.

Mohamed

July 21, 2010 7:13 AM

To Clyde
"At 38, with a Masters degree and 10 years experience in engineering, I would like to just find a steady job in the USA, at this point in my life."

Wow! Are things that bad in the US?

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July 28, 2010 2:04 AM

Wow! Are things that bad in the US? www.nflvikingsjerseys.com

jjw

September 14, 2010 8:59 AM

now I am sure they are waiting for the government to bail-out their undefunded pensions.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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