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Monday, January 09, 2006

This could be huge 
IBM has announced that it's freezing its defined benefit pension plan.

From the Society of Human Resource Management:


In IBM's case there was another factor: Big Blue has been battling in court against charges that its prior conversion of its traditional defined benefit pension to a defined benefit-hybrid cash balance plan discriminated against older workers. Its decision going forward to only provide a 401(k) defined contribution plan for active employees reveals exhaustion with this battle and may prove a harbinger for other companies whose cash balance plans also face legal challenges, despite expected congressional action to try to clarify the status of these plans.


You expect that from a struggling airline like United, or a steel mill struggling under the weight of globalization. But when Big Blue, the penultimate growth-stock company, begins to creak under the weight of its retired labor force, things are getting ugly.

Other large companies won't be far behind. Remember, times are good just now. The Dow just closed above 11,000 for the first time since 2000.

When things turn south again, the pressure on company management to find places to cut costs will be intense.

Which means, folks, don't count on that pension. Your Roth and traditional IRAs, your nondeductible IRAs, your SEPs and SIMPLE plans, your catch-up contributions if you're age 50 or older, your Thrift Savings Program, are all vital. Use them to the fullest.

Splash, out

Jason

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You're certainly right to encourage people to save on their own. So many people can't or won't, though.

Heaven help us, what will we do in 2050 and beyond with tens of millions of sick and poverty-stricken old folks?
 
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