Bid Goodbye to the American Pension Plan

If you can remember when companies gave retiring workers gold watches or comprehensive health insurance for the rest of their lives, I’ll bet you can also remember the last days of black and white television. And if the current trend persists, in ten years you’ll be looking back at the American pension plan just as nostalgically. According to Brad Smith, partner in the corporate practice at NEPC, a Boston-based investment consulting firm: “We expect that approximately 25 percent of workers with an active pension are likely to see the plan close or freeze at some point in the future ….”

What’s more, an NEPC corporate trends survey conducted in 2014 shows, of just one  hundred and seventeen existing corporate-sponsored plans, only twenty-eight percent remained open for new employees to join. Smith says the traditional pension plan started to disappear back in the mid-eighties when employees began preferring “the transparency, simplicity and portability of 401(k) retirement plans.”

But USA Today’s Michael Molinski has a different take on why pension plans are losing traction in corporate America. Companies are looking closely at their bottom line, he says, and they’re hollowing out pension plans just because they can.

The reduction in America’s pensions also contributes to the widening gap between the rich and the poor. As Molinski points out, this gap has become even greater because the lower and middle classes can no longer afford a pension, whereas the wealthy can.

The 401(k) and other defined contribution plans have turned out to be another frighteningly unreliable component of retiring workers’ compensation. According to the United States Bureau of Labor statistics, about forty-three percent of private workers participate in their 401(k) or other defined benefit plan. Corporations like to brag about such “benefits,” and many employees look to such plans as security for their senior years. But the truth is 401(k) plans were never meant to support workers in their retirement years – nor are they likely to. According to the Molinski article, “Through the end of 2015, the average 401(k) balance at Fidelity Investments, one of the country’s biggest 401(k) providers, was just $91,300— a paltry amount compared with what experts say you would need to save for retirement.”

Pensions, then, are disappearing from the American corporate landscape. Annuities Consultant, Stan Haithcock, from Ponte Vedra Beach, Florida, puts it even more dramatically:  “Pensions are financial dinosaurs, especially in the private sector….You will never see them return.”

So whether you have an already-endangered pension, or you’ve been on your own, with or without a 401(k), you simply can’t play a waiting game with your retirement.  You can’t depend on the Department of Labor, Social Security, a pension fund administrator, your employer or any outside force to take care of you in your twilight years.

This is the strength of adding physical gold to your IRA; it’s something you can take control of, an asset that resists both inflation and stock market volatility.  Its role in your portfolio is precisely to provide the solidity and security market- and dollar-based assets lack.

It’s clear now, with the world economy still uncertain almost a decade after the Great Recession, that the investment world is catching on to gold’s unique role.  The shiny metal has just come off its biggest quarterly growth in thirty years, and some observers are calling for even more substantial gains.If your paper assets go south, if your employer trims your pension fund, or if your 401(k) plan winds up with lackluster returns, gold will be there for you as a long-acknowledged safe haven.