Tuesday, March 15, 2011


Sixty years ago,it was commonplace for graduates to stay with the same company for their entire working life. One knew that if one worked to "normal retirement age", one would qualify for what is technically known as a "defined benefit" pension. This wa a very important aspect of one's employment..

In more recent times, changing jobs in mid-career has become commonplace, and is often recommended to ambitious young folk. Due to mergers and changing needs, "moving on" is often involuntary. In these circumstances, a "defined contribution" plan has much greater appeal. Its customary "portability" allows a person who changes employers to build up retirement income relatively painlessly.

However, it is important to recognize that defined benefit plans are still important for certain employees. For example, state, county, and municipal employees often spend their entire working life in the same employment. Also, in some trades the only viable provider of pensions is the union, since over a long career in (say) the construction industry the worker may have many different employers.

The media often finds outrageous examples of swollen pension plans, and rightly highlights them as brakes on our nation's
economy. In this brief blog I merely wish to point out that pensions are mostly beneficial, but "one size doesn't fit all". As we read about these issues, it is important to keep an open mind.

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