How Pensions Could Ruin Your Retirement

[00:00:00]how pensions could destroy your retirement. It's very funny. We always hear about the scam that's a 401k and blah blah blah, but we never have about the scam that's a pension and how many retirees uh got their retirement destroyed because they had a pension.

[00:00:13]It's just sad. So, I'm reading this book by Ellen Schultz called The Retirement Heist. I think it was published in 2012 or something like that. She used to write for the Wall Street Journal and it's chalk full chalk full of uh examples just regular people getting screwed getting screwed left and right.

[00:00:28]So, one of the examples is crazy. This guy right here, Charlie Craraven, he got m he's dead now, but he's got macular degeneration, so he can't read. And what's going to happen here is old Charlie is a retired mine supervisor in Tucson, Arizona.

[00:00:45]For 18 years, he received a pension of 300 basically 50 bucks a month. In late December of 2004, the check stopped arriving due to administrative issues when the pension plan had changed hands many times. All right, so what happened?

[00:01:02]Let's go into the story here. This is freaking nuts, dude. So he [laughter] he got a letter saying you must repay. Remember, he's only gave 350 bucks a month and he'd been retired for 18 years. He got a letter saying, "You must repay $18,363 in one lump sum by the end of the year if you're unable to make the lumpsum payment." This is from Fidelity, by the way, because Fidelity, I guess, was managing the pension stuff at that point.

[00:01:41]If you're unable to make the lump sum and wish to set up a repayment plan, it will be 1,500 BUCKS A MONTH FOR THE NEXT 12 MONTHS. If you do not comply, the plan sponsor may take additional steps to over to uh to correct this overpayment because they did an audit and they said we were paying you too much money. Such steps might be to reclassify the overpayment as a miscellaneous payment, a 1099R taxable as income, uh, and send you to collections. And and my man Charlie here says, [laughter] "I thought when you retired, that was it. How could they come to me all these years later and tell me this? He's a widowerower with macular degeneration and is nearly blind."

[00:02:26]He had a friend read the letter to him because he couldn't read it. Anyway, his friend who's some lady, a widow he met from Nevada named Ruth uh what's her name? Ruth Emily or something like that.

[00:02:36]Uh she said you you can write to Fidelity to question this or you can call the toll-free number. And uh Ruth called the toll-free number and she was 79 at the time as was as Charlie. He was 79 at the time when he got this letter. So he had been retired for 18 years. [snorts] He called but he got an automated system.

[00:02:56]They were put on put on eternal hold.

[00:02:58]Yep. We never got to talk to anyone there. So then he got a second letter sent to his previous address by the way stating [laughter] basically you got until the end of the year to do this. If you don't you're in a world of hurt. All right. So let's let's keep going. So this guy is a widow. Macular degeneration is 350 bucks a month. He's paying they say you need $18,000 to settle this. Um, and so check this out.

[00:03:30]So eventually British Petroleum acquired the pensions when they bought out Amico Amblico or something like that who bought out Cyprus who was purchased by Phelps Dodge.

[00:03:46]And so anyway, following a second review of the paperwork, prompted by a reporter, our reporter here, Fidelity concluded that BP was indeed responsible for Craraven's pension. After all, this doesn't happen very often. It sent him a letter saying, "Resume paying his pension and he receive his back payments with interest." And as Ellen says, unfortunately, most retirees don't have reporters interested in figuring out how much a pension is owed. All right, so let's keep going here because remember the pensions, the day the great old days of the pensions. Here you got Connie Sharp, a widow in Las Cusus, New Mexico, had been a classic corporate spouse, moving many times as her husband George set up missile programs in Florida, uh, California, and New Mexico.

[00:04:37]When George retired in 1975 after working at Bell Laboratories for 34 years, he had a pension, retirey health coverage, and a death benefit. The couple hadn't taken out life insurance because they were relying on the death benefit of George's $34,000, which was the equivalent of what he made his last year. That'd be the equivalent of 200,000 bucks say. So George is making bank. So this is what I'm talking about.

[00:05:01]George is making bank, but he was relying on the pension, the life insurance, and the health benefits.

[00:05:08]But when George died in 2003, his wife's health coverage ended 6 months later, and his pension ended, too. Lucid, who is now involved, maintained that Connie Sharp had waved her right to a survivor's benefit on the pension, and she didn't remember doing so and asked to see the paperwork. Lucid told her she would have to subpoena the records. With just $950 a month in Social Security, hiring a lawyer was out of the question.

[00:05:37]If I don't live too long, I won't have to I won't have to go on welfare. I sure do feel sorry for the big executives who made millions when they retire. Yep. Uh Margaret Jelly, Bill Jelly's wife is a funny name, Billy Jelly, also found herself in a fix she never expected to be in. She was also the classic stay-home spouse in the golden age of benefits. Is anyone as likely to have a secure retirement? It was this post-war cohort whose past followed a common trajectory. Bill began working as an electrician apprentices for Western Electric when he was 17. He went to the war, served in Italy, came back and became a full-fledged electrician.

[00:06:14]Millions like him. But when Bill [laughter] [snorts] But when Bill got Lucen's letter in early 2003, because they started to cut benefits, uh, a mere he knew that if he didn't die before February 3rd, a mere three weeks later, the death benefit that he was relying to give to his wife would vanish. He figured odds were good he'd beat Lucent to the punch that he would die before Lucent reiged on his death benefit because they already cut pension benefits. They already cut employee retirey benefits. I have a deadline, he told his wife when he was back in the hospital on January 14th for what they both knew would be the last time. He didn't make his deadline. He celebrated his 80th birthday in the hospital, which is also his 50th Valentine's Day with his wife. The the nurses had a small party for him. He died and Lucent saved $39,000 on the death benefit.

[00:07:09]So what's the reliance on pensions? So we have example. This is after Orisa was written in 1974 to fix it. All these retirees who thought they had a secure pension were screwed. Thousands upon thousands upon thousands and then they try to fix it again in the late 80s and that just made it worse. Just made it worse. So everyone says well pensions are the uh that was what you know that was the golden era of pensions. What caused pensions? Anyone want to take a guess? Let's take a look here. Let's take a look what caused pensions. And we'll go to my LinkedIn feed here and we'll show you the thing I just posted.

[00:07:49]All right. So, we're going to show you this is from the BLS, compensation from World War II through the Great Society.

[00:07:57]All right. In September 1942, uh the president, that's FDR, was given the authority to stabilize wages and salaries based on 1942 levels. As a result of wave restrict wage restrictions, employers who needed to track labor resorted to providing a growing range of benefits. Pensions, medical insurance, paid holidays, vacations, and death benefits.

[00:08:22]Pensions were a result of the wage control acts of World War II and from day one were suspect. That's why Orisa was passed in 1974 to fix them because we had massive amounts of pensions going under and retirees who were relying on those pensions were so didn't work. Congress tried again in the late 80s again didn't work. Pensions were a short-lived phenomenon. It's just that simple. Americans were always responsible for their own retirement.

[00:08:49]Social security, not pensions or 401ks, is what allows the vast majority of Americans to retire in dignity. is social security because your 401ks can be corrupted too as we saw. I mean just I mean look man Enron warcom all that I mean 2000 2001 2002 first core 2003 uh October 7th October 2007 to freaking March 9th of 2009 a million examples of 401ks just taking it on the chin and yet you're relying on a pension. All these idiots say, "Oh, the pensions are the golden age of retirement." And if you were relying on the pension, they started cutting your benefits like happened time and time and time again.

[00:09:33]In fact, let me give you another example. Again, this just from Lucen because this is just a chapter I'm on.

[00:09:38]Even the oldest retirees were hit hard when Lucen started eliminating benefits it promised through Bell Laboratories, AT&T, whatnot. Lucen eliminated dental coverage and Medicare Part B payments which retirees used to pay for the Medicare premium. So Lucen was actually even paying Part B. For Howard O'Neal, who was 90 at the time, losing the premium coverage for himself and his wife Mabel cut his $970 pension check almost in half. He earned the benefits working at Western Electron from 19 Western Electric from 1939 until 1979.

[00:10:16]He worked there for 40 years. He thought he was a pretty he thought this was pretty a rough treatment akin to getting a pay cut retirement which it actually was. Retirey benefits are a form of deferred compensation which is what allowed them to come in because of the wage controls under FDR.

[00:10:35]It was a pension cut.

[00:10:39]Anyway, you're responsible for your own retirement, man.

[00:10:43]If you're solely relying on a 401k, think, "Well, the 401k has done so well in the past, it should continue to do more." And you think, "Oh, social security is a joke." Social security is the lynch pin for successful retirement.

[00:10:56]Take away Social Security, you're not going to have the growth of your 401k.

[00:11:00]Just not. How many retirees are pulling money from 401k plans? It's freaking billions of dollars.

[00:11:08]I social security billions of dollars.

[00:11:10]If they did not do that, that would be coming from their investments if they had them. And what would that do to investments?

[00:11:19]Anyway, just your retirement. You're you're responsible. And social security is it, man. Mess with social security and all things go to hell. All right.

[00:11:29]God bless. We'll see you.