Traditional pensions are disappearing in America, and the federal government just made it easier for employers to get rid of them.
With no fanfare in early March, the Treasury Department issued a notice that allows employers to buy out current retirees from their pensions with a one-time lump sum payment. The decision reverses Obama-era guidance, issued in 2015, that had effectively banned the practice after officials determined that lump-sum payments often shortchanged seniors. Now, advocates for the elderly worry that millions of people receiving monthly pension checks could be at risk.
However, behavioral economists have found that people tend to value money that's right in front of them over money they will get in the future, even if the total over time would be greater. Plus, retiree advocates say that most people aren't well-equipped with the advanced financial knowledge needed to fully evaluate their options, and often, they're pressured by family members.
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