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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Pension plan popularity

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: One of your articles said that pension plans are making a rebound in popularity but everything I hear in the news is about pension plans going bust. Also, do I have to give up the ability to manage my own retirement money in a pension plan?

A: Old-style defined benefit pension plans promised to pay a stated dollar amount each month for the life of a retired worker despite the overwhelming number of variables and unknowns in the economic future. The concept is really ludicrous from an accountant’s viewpoint, yet these plans survived for decades as our country grew. Millions of workers relied on these promises by their former employers and many were disappointed when the pension did not provide the benefits expected. These plans are not making a comeback; they will eventually fade into extinction. Now the most common use of defined benefit pension plans is to minimize taxes for high-income earners in small closely held businesses. In this case it is not really the promise of future benefits that is important, but the ability to shelter up to $100,000 or more of current earnings from income and wage taxes. For affluent professionals, these plans offer a great way to catch up on retirement savings more easily than 401(k) plans and other popular methods. In these new smaller pension plans, the investments are usually managed by the person who receives the benefit in a manner similar to the more popular 401(k) plans. For more information, see One advantage of paying the duplicate policy fee is that the policy is delivered by FedEx or another service with signature request, so you are assured that it will not be lost in transit again. All of the companies that charge these fees, to my knowledge, still offer the same services for free online. So if you don't want to pay the fee, just get the instructions on how to download and print the policy yourself.


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