Tags: pensions | 18% | unfunded | benefit

Towers Watson: Private Pensions Rise to 18 Percent Unfunded

By    |   Friday, 17 April 2015 06:00 AM

The aggregate funded status for the largest 100 defined benefit pension programs among publicly traded companies dropped to 81 percent as of Dec. 31, 2014 from 89 percent a year earlier, according to a study from consulting firm Towers Watson.

With the funds' obligations standing at $1.33 trillion last year, compared with assets of $1.08 trillion, the funds faced an aggregate deficit of $248.2 billion.

"While plan assets gained value, falling interest rates coupled with updated mortality assumptions [which reflect increased life expectancy rates] significantly increased liabilities, thus wiping out most of the previous year’s gains," the study states.

"Sponsors are not yet out of the funding hole dug by the 2008 financial crisis."

Meanwhile, many plan sponsors have cut their investment risk during the past five years by gradually shifting asset allocations from stocks to bonds and alternative investments, the study says.

To be sure, some would question whether alternative investments, which include hedge funds, private equity and real estate, lower investment risk or increase it.

Elsewhere on the retirement front, one rule of thumb posits that your retirement income must total 80 percent of your final salary to maintain your standard of living.

"But there is a decent chance you could happily retire with far less," writes Wall Street Journal columnist Jonathan Clements.

He cites a 2014 survey of recent retirees by T. Rowe Price Group, showing that on average they were living on 66 percent of their pre-retirement income.

But that wasn't sending them to the poor house. A total of 57 percent were living as well or better than when they were working, and 85 percent felt "I don’t need to spend as much as I did before I retired to be satisfied."

Remember that in retirement you no longer have to save for retirement, you no longer have to contribute to Social Security and Medicare, your taxes will likely go down, and at some point you will start receiving Social Security income.

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The aggregate funded status for the largest 100 defined benefit pension programs among publicly traded companies dropped to 81 percent as of Dec. 31, 2014 from 89 percent a year earlier, according to a study from consulting firm Towers Watson.
pensions, 18%, unfunded, benefit
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2015-00-17
Friday, 17 April 2015 06:00 AM
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