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One leg of the stool is gone. Now it’s up to you.


Two weeks ago, General Electric announced that it was freezing its pension plan. Payments will continue for those that are currently retired, but for those who are still working, continued employment will not increase their pension benefit when they do retire.

We’ve already seen this story with our Detroit auto companies and other businesses in the area. I mention General Electric because it was one of the original twelve Dow Jones Industrial companies back in 1896.

There’s no doubt that traditional pensions are becoming dinosaurs. They’re near extinction for a number of reasons, including the competiveness of the business world, and technology that has led to longer lifespans. Simply stated, the world has changed significantly since the Dow Jones was established as a financial measuring stick.

Of all the contributors to the demise of pensions, I believe the most significant is longevity. People are simply living longer. On more than a few occasions I have encountered retirees from the Big Three that have been retired for more years than they actually worked. That’s a long time to be receiving pension checks.

Factor in that pensions also cover surviving spouses, and it’s obvious that pension payments are going out the door much faster and longer than the actuaries projected years ago.

In the late 1800s, when General Electric became part of the original Dow Jones, German Chancellor Otto von Bismarck initiated a public retirement program similar to our Social Security. It was this program where age 65 became associated with retirement.

That, too, seems to have gone by the wayside. With our Social Security system, you have to be older than 65 to receive full retirement benefits. Early in my career, advisors described retirement as a three-legged stool. The legs were pension, Social Security and personal savings.

That concept is also fading into the sunset. Fewer and fewer people are covered by traditional pensions. Social Security continues, but without modifications there will be reductions in benefits at some point. That leaves personal savings to carry people through their retirement years.

While many have retired from their career jobs and are pursuing their dreams, there are still an astonishing 9 million people older than 65 who continue to work. Some are doing so for reasons other than financial necessity. But many are working out of necessity because they’re physically vibrant and understand the need to keep money coming in the door to pay the bills and to continue building their nest egg.

With the demise of pensions and increased longevity it becomes imperative that people realize and understand just how important it is that they save and invest for their future. In this competitive world, Corporate America cannot support their retirees’ retirement.

Social Security alone, which is funded by contributions from both employers and employees, cannot generate enough income for most people. Personal savings, which were once considered supplements to pensions and Social Security, are now key components for a comfortable retirement.

The change at General Electric is just one last reminder that, when all is said and done, your future lifestyle rests upon your own financial success and saving habits.

On another note, I’d like to mention that my book, “A Thought for Your Pennies,” will soon be available through Amazon and Barnes & Noble.