Though government employees may enjoy higher salaries and benefits that their corporate peers, this article argues that these employees maintain a false sense of security. Due to the financial burdens currently being placed on most metropolitan areas, the pension plans and job security of government workers are starting to falter. One agent posed the question, “what proactive steps as an advisor would you help your clients take if they had a concern about this? What products would you recommend to help mediate any risk in this situation?”
Agents responded by noting that a pension guarantee does not exist, no matter the corporate or municipal strength, the pension plan, and funding details. To mitigate risk, agents advised first learning about pension options, and understanding the current security levels of a client’s plan. Then, to create security, hedge oneself with alternate savings and a diversified retirement portfolio.
This risk is exemplified by the city of Detroit’s bankruptcy filing. One agent noted, “they have been living off of bond money for the past year, and tried to offer 10 cents on the dollar to creditors to save themselves. Public pension funds are a very large stakeholder in Detroit’s municipal bonds.”
How would you advise clients who worry about their pension plans? Tell us here.