How Bad Is It Anyway?
Just a week ago, the leader of a nonprofit organization wrote of her frustration about the seemingly hopeless situation of saving for retirement. “With just about every pension plan in jeopardy, social security in ruins because of theft from our own government, and 401K’s essentially a pyramid scheme, does it make sense to save at all?”1 Her sense of hopelessness was palpable. Was she correct? Are there no dependable, stable options for the small nonprofit (include church, ministry, and mission) to offer as solid retirement options for their personnel?
Are Pension Plans in Jeopardy?
In August of 2016, Tobias Levkovich of Citigroup wrote that the pension plans of the top 25 S&P 500 companies, the biggest and best of American corporations, were underfunded by $225 Billion. It appears that the cumulative pensions of the S&P 500 companies descended from fully funded to $375 Billion underfunded since 2007!2 If headlines and articles are to be believed, State and Local Government pension plans are also underfunded by a cumulative $5 Trillion dollars.3 These figures certainly give credence to the disappointment expressed in Ms. Perry’s comment to the napa-net.org article.
It should be noted that, while these studies do identify areas of concern, they do not apply to every pension plan across the United States. The Christian Churches Pension Plan is a plan owned and governed by members of the Plan. Funds submitted by ministries and nonprofits, and employees on their own behalf, are invested throughout each year. The Plan is monitored annually by consultant actuaries for financial soundness, and attorneys for legal compliance. The assets of the Plan are managed by recognized Asset Managers across the United States. US Bank serves as the Plan Trustee and processes each monthly payment to Plan retirees. Pension Plans must be examined on their own merits. Many are fully committed to those they serve.
Is Social Security in Ruins?
Again there are ample reports available, from sources both reputable and suspect, stating Social Security is in a tailspin. In 2013, Forbes magazine published an article that pension benefits were solvent through 2033, but disability payments would have been insolvent in 2016.4 In late 2016, the Congressional Budget Office reported that retirement benefits would have to be cut by 31% in 2031 without changes to the Plan, and the disability trust fund would be exhausted in 2022. The Social Security Trust Fund itself estimated the necessity of a 21% cut in retirement benefits in 2034.5 The political reality is that changes will be made to the plan. Some are in the planning process currently. A Voice of the People survey also demonstrated a large majority of the American public favors changes to Social Security.6 This should empower politicians to make moves necessary to continue the plans in some form.
Create a Plan and Execute the Plan – Do Not Panic
It is easy to become confused and even paralyzed by the voices of gloom. Conversely, if we read widely and respond wisely, we can bring ourselves to calmly face our retirement future. If you serve in a ministry, mission, or nonprofit work, you can use a plan like the Christian Churches Pension Plan as the foundation cornerstone for retirement. While Social Security may face changes, the political reality is that some plan will continue in place for the foreseeable future. There will never be an end to the voices of doom. Choose instead to think clearly and plan soundly!
1 6 Assumptions That Can Wreck a Retirement. Adams, Nevin. napa-net.org. February 14, 2017.
2 Top 25 Corporate Pension Plans Alone Are Underfunded By Over $225 Billion. Durden, Tyler. zerohedge.com. August 22, 2016.
3 Are State and Local Government Pensions Underfunded by $5 Trillion? aei.org. July 5, 2016
4 How Secure Is Social Security? Patton, Mike. forbes.com. May 31, 2013
5 31% Cut in Social Security Benefits Needed by 2031: CBO. Napach, Bernice. thinkadvisor.com. December 27, 2016.
6 79% of Americans Favor Social Security Benefit Cuts, New Survey Shows. Williams, Sean. The Motley Fool, LLC. January 16 2017.