It has taken about 40 years for baby boomers to awaken from a Rip Van Winkle slumber, but they are finally starting to pay attention — with dread — to their now eagerly awaited pension benefits.
Unfortunately many are finding that the pensions that they are due aren’t at all like the ones paid out from their mom and dad’s working years. For millennials the picture is even bleaker.
They’ll have to rely on 401(k)s or other fixed individual accounts they’re now paying into. But that won’t be a problem for them until they in the same Rip Van Winkle fashion wake up to reality in another 40 years.
For the nation’s more than 75 million baby boomers born between 1946 and 1964, the reality is now as more people in this demographic group are retiring and finding that their pension funds are in trouble. That became clear when the Central States Pension Fund filed for reorganization under a new federal law.
The ages-old Teamsters pension fund sent letters to more than 400,000 members, warning that their benefits must be cut. It is a scary reality for people who retire expecting to live on a certain fixed income only to be rudely awakened to learn that the amount is far less than they had budgeted for a comfortable life.
Some retirees reported getting letters saying that their pension will be cut in half starting July 1. People at least age 80 won’t have their pensions cut. Those age 75 and up will have to endure smaller cuts than younger retirees. Disability pensions will continue at the same level.
The Central States pension is a multi-employer plan. The reorganization and the benefit cuts are an attempt by the fund to avoid a collapse in the next few years.
If the Central States fund were to fail, it could wipe out a federal insurance program. Many other pension plans are woefully underfunded. The drastic action by the Central States pension could serve as a model for their repair.
If that happens, the web of retirees affected will grow even larger. Baby boomers who paid little attention to pensions and Social Security in their 20s, 30s, 40s and even 50s are sitting up and taking notice now.
Few Americans have savings to fall back on in retirement. They counted on Social Security and pensions to carry them.
That long-awaited ride to Easy Street looks like its breaking down before it reaches where baby boomers are waiting to be picked up.