The "Three Legged Stool" of Retirement

According to a recent survey by the Associated Press, more than 80% of Americans expect to keep working as they grow older.  For some that may be a choice, because they enjoy working, but for most it is because of limited retirement resources.  It has been said that a secure retirement sits on a “three legged stool” with Social Security, retirement savings including annuities, and pensions being the three “legs” of the stool. 

Some are of the belief that Social Security, one leg of the retirement “stool”, will be encountering funding problems in the distant future.  According to the Center for Retirement Research at Boston College, pressure is building in Washington to raise the Social Security retirement age as one way to help improve the funding of the Social Security system. While many of the members of the ADC are in good physical shape, the years of working with the tools take their toll as we grow older.  Raising the Social Security retirement age may be fine for those who don’t do manual labor, but members of the ADC trowel trades Union are physically “beat up” after a long career of working with the tools and find it increasingly difficult to work as they get older. This is why the two additional legs of the retirement stool provided by the Union are so important.   

All members of the ADC have an annuity to augment their personal savings; this is another leg of your retirement stool.  Your contractor contributes a fixed amount to your annuity account for each hour you work.  This is your money to do with as you choose after you retire.  The one drawback of an annuity is that it is limited to the amount of money in your account.  When it’s gone, it’s gone.   Your pension gives you a fixed monthly payment for the rest of your life.  You can outlive your annuity but you cannot outlive your pension.  We all know hard it is to save money.  The annuity is designed to help you save for retirement while you provide for your family during your working years. 

While a union pension, the third leg of your retirement stool, is one of the major benefits of working union, pensions are not all created equal.  Much has been written and said about the lack of funding for public workers’ pensions.  I often hear from our members regarding the problems of the State of Illinois workers pension plan and their concern for their own pensions.  This is where we differ from our public plan Brothers and Sisters. Their pension plans depend on legislatures to allocate the proper funds to keep their pension funds healthy.  If the legislature does not find the money to allocate to pensions and “kicks the can down the road” to be addressed at some later time, the pension will suffer.  Obviously, the sooner you address a funding deficiency, the easier it is to correct.  Our Union Pensions are governed by a Board of Trustees, half from labor and half from management.  Those Trustees are responsible for making sure those pensions are properly funded.  The Administrative District Council is affiliated with 3 different pension funds and all are well funded.  All of the Labor Trustees on our affiliated pension funds are trades people, participants in the funds themselves, and will one day receive a pension from the same funds in which you participate.  They are very careful to make sure our pensions are properly funded. 

So how does your pension get the money it needs to be properly funded?  Each June, rates are negotiated with our various Contractor Associations, and once the contract is agreed upon, the raise is allocated to the various benefits and wages you receive as a Union worker.  Along with the funding of your health and welfare plan, the funding of your pension is one of the first things addressed in the allocation process.  So how do the Trustees know how much of your raise to put towards your pension? They consult with the pension fund actuaries, the professionals who analyze the data particular to your plan.  They look at things like the ages of the participants, the investment results, projected work opportunities for participants, etc. and then make funding recommendations to the Trustees based on this information.  The hourly allocation to the pension fund is then made in accordance with these recommendations. 

 When I meet our retirees at Union meetings and our Retiree functions such as the ADC Retirees Christmas party, I am reminded of the financial security afforded our retirees by our various annuity funds and pension plans, and the importance of keeping the three legs of our retirement stool strong.  No one ever got rich by spending their career with a trowel, back filler, float or welding lead in their hand but at least their Union membership got them the security of knowing there would be a steady monthly income for them after their working days were through.