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Finance Allah shmoop What is the Pension Benefit Guaranty Corporation

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Well the PBGC is a notionally independent agency of the

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federal government Its goal is to protect the retirement incomes

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of nearly forty million American workers in nearly twenty four

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thousand private sector defined benefit engine plans And that mission

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statement is right off their website The agency was set

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up in nineteen seventy for is part of Arisa Employee

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Retirement Income Security Act to protect defined benefit plans That

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one were there Benefit is a huge deal because it's

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non identical Twin sister is a defined contribution plan The

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big diff well in a defined contribution pension plan employees

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contribute some percentage of their income to their retirement pension

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and the employer matches it and that's it The money

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gets invested in the stock market and goes up and

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down and up and down but over time mostly up

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And then the employees retires Decades later owning whatever the

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market or their investments that they risk say they young

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period End of story But in a defined benefit plan

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the employer essentially guarantees a minimum amount of invested return

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That is the big boss Usually the federal government with

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its union employees on taxpayer dollars then guarantees a raid

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of say nine percent a year to the employee retiring

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in the form of a minimum monthly draw from their

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pension that the employees can take out If the market

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goes through a really bad spell well then it's up

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to the company to make up the difference to that

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employees The people who framed a Risa knew of the

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likely issue that the guaranteed investment return could end up

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bankrupting states and or the country So PBGC was formed

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and it helps a lot of people like one point

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five million who ultimately rely on PBGC to bail out

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their pensions And if you're one of those people while

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you can expect to get something like sixty five thousand

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dollars annually or about fifty three hundred bucks a month

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assuming you retire at sixty five So if you retire

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early well those cheques arriving in your mailbox won't be

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quite so heavy Retire late in while the numbers go

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up And maybe the best part is that the U

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S taxpayer doesn't need to get all up in arms

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Since the dough used to manage PBGC doesn't come from

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John Q Taxpayer but rather from the private worlds employers

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So in forty or fifty years PBGC may be your

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best friend but until then well you're invisible Rabbit pal 00:02:30.543 --> [endTime] will be with you through thick and thin

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