The Ignorant Investor

Today's Wall Street Journal carried an article on the new tendency of companies to "freeze" their pensions to exclude new employees or workers under age 40.

This news isn't going to surprise anyone who has been employed at any time in the past 20 years. From the moment I started my first real job twenty years ago, the word 'pension' has never crossed any of my bosses lips. "401K"? Yes, I hear that one a lot. Some programs have been generous with matching funds, others less so. My current employer, for example, gives employers 10 cents for every dollar they put into the program. That's right. All of ten cents. As you can imagine, I'm not planning on retiring any time soon. Match that with the annual increasing part of the premium I pay for health insurance and plans to reduce social security by the time I retire, and I'm looking at what Alan Greenspan would call a 'slightly challenging retirement planning issue on the horizon." Or, in other words, the chance of genteel poverty in my elder years if I don't act now.

It's difficult not to feel grim in such circumstances. The general thrust of the past few years is this: you can't rely on corporate America to take care of retirees at a time when American capital is triumphant over American labor. Workers don't have the bargaining power they once did, and the speed with which the modern corporation can divest and restructure itself has made the pension an awkward detail which no deal-maker wants to deal with if possible. Self-reliance is being thrust upon us, whether we are ready for it or not.

So I've heard that the new rule of thumb should be to take 20% out of one's salary, including any 401K program, and invest it according to sound principles so that a comfortable retirement may be assured.

Granted, if I win the lottery, get a huge promotion, come into millions- maybe I'll change. But for now, a hopeful cautious savings scheme is what I'm going with.