I felt I had to comment on the letter, “Writer doesn’t understand contract.” The writer goes to great length to point out the flaws in another person’s letter, but then makes one of his own.
Quote: “With reasonably prudent selections, it is likely that upon retiring after a full career the employee could invest the 401k funds in safe securities, such as U.S treasuries, and get a similar income from the interest that the pension would have provided.”
As of Monday, Treasury yields were 2.83 percent (Bloomberg) and I feel the need to point out, “if” all it took was a return of 2.83 percent to fund a retirement plan and make it comparable to the defined benefit plan, the move to a 401k would have never been on the table for a vote by union members by the Boeing company because it simply wouldn’t have been an issue if it where that easy.
What really happened in this vote was a shift of risk from Boeing to the backs of the employees and taxpayers in general. Is this a good thing? In my opinion, no. Why? This shift in plan design makes a group of employees responsible for their own outcomes. For many this is going to be an impossible task given that many are spenders not savers.
Why is this a taxpayer problem? This will put an additional strain on government programs like Social Security. For far too many Americans, Social Security is their primary retirement plan. To keep SS functioning (and no, it’s not going away), higher taxes will need to be levied on everybody so it can meet the challenges presented by those who did not save enough. When I look at this transition for these Boeing workers, I see future problems for all of us, as some workers will adjust, but many won’t. Those that don’t become savers, will just add to the pull on social services.
To those cheerleading these changes, the expression “cutting off your nose to spite your face” comes to mind.