Anchor: Financial adviser, Kurt Pearson, joins us now and we’re talking about pensions today. I understand something recently happened in Chicago, what was that about?
Kurt: Chicago bonds were just recently downgraded and it’s mainly because of their pension liability. A pension liability means that a city or a municipality like Chicago has to retain a liability on their balance sheet for unfunded pension commitments. And so as the aging of the population keeps going up and more people retire that liability on a city’s balance sheet like that can become quite onerous. And they estimate that it’s around a 20 billion type of a number for Chicago and so because of that it impacts the financial stability of perhaps the entire city.
Anchor: Wow, and strangely enough people living longer factors into that too. So how secure is a pension payment?
Kurt: Well, if someone is counting on a pension payment to help fund their retirement income, so say they really need to dig in to the security of the backer, of the pension and to see how they are planning for this inevitable continuing aging of our population. That’s very important.
Of course, another proactive step that most people can take is to really begin diversifying their sources of retirement income so that they have sources for retirement income that isn’t heavily dependent on that pension payment. Some of their own savings, perhaps, taking a look at social security and maxing that out, some of the other funding sources for their retirement income.
Anchor: I have one more quick question; what about younger workers in the country? People around my age, what is the future for pensions for that group of the population?
Kurt: Well, pensions defined, as we call them in the industry defined benefit plans really begin fading in a typical company benefit package. So most younger workers may not even have a pension as part of their group benefits so it’s something for them to check into.
Anchor: Very quickly; what does this mean for retirement for a lot of people?
Kurt: Well, it’s a trend, Steve, that we’ve been seeing in recent years where people have to really take ownership of their own retirement planning because the days of relying on a company pension to fund your retirement and having that be your main source of income, those days are probably over. And so people have to take a look at, “Hey, how much do I need to be saving in my 401K? What are some other ways that I need to prepare and plan properly for that stage of my life?”
Anchor: Alright, Kurt, very good information. Thank you very much. If you have any questions for Kurt Pearson you can give him a call at Compass Financial the number there; 515-327-1020.