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US. Pandemic creates pension plan tension: Take the lump sum or trust lifetime payments
One of the risks that comes with pension plans may be looming larger than usual.
As many companies work to regain their financial footing in the midst of continuing economic uncertainty caused by the coronavirus pandemic, a retiring worker’s decision to take either a lump sum or lifetime payments from their pension could boil down to one factor: whether they think the employer will be able to meet its long-term commitments.
“That’s one of the biggest considerations that employees have when doing this kind of analysis,” said certified financial planner Leslie Beck, owner and principal of Compass Wealth Management in Rutherford, New Jersey. “Many have concerns about their company remaining viable.”
The number of private pension plans — which employers fund on behalf of workers — has been dwindling over time as companies have shifted the burden of retirement savings to employees through 401(k) plans or other defined-contribution plans.
In 1975, there were more than 103,000 pension plans in operation, according to the Labor Department. By 2017, that number had dropped to about 46,700. During the same time, defined-contribution plans grew to 662,800, from 207,700.
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