Berko: TIPS and lost pension
Friday, May 24, 2013 7:00 AM
Dear Mr. Berko:
How can you recommend Treasury inflation-protected securities? The government claims that inflation is 1.8 percent. That is ridiculous. It’s much higher than that. Our homeowners insurance just increased to $7,800 on a home worth $340,000. Restaurant prices have increased by more than 10 percent, and so have movie theater tickets and our cable bills. We’re paying $3.86 per gallon for low-grade gas. Our health insurance increased 22 percent this year. New cars cost more than ever. My lawyer raised his fees to $350 an hour, from $300, and the dental hygienist raised her fee from $90 to $105. Have you seen the prices at supermarkets or purchased an ice cream cone recently? I could continue for pages.
Knowing this, do you still recommend the purchase of those bonds in my individual retirement account? And should I sell the TIPS that I bought last year, which have a face value of $18,000? The 1.8 percent inflation number is fraudulent.
Finally, before we were married, my wife worked for 11 years for a man who shut his doors 20 years ago. We think she had a pension plan, but we can’t find the firm, its owners or its successors. Could help us with this? My wife thinks she has about $11,000, but we don’t have any papers to prove it.
F.S., Port Charlotte, Fla.
I recommended Treasury inflation-protected securities (TIPS) last year, and I’m sorry I did. So in answer to the first question in the second paragraph of your letter, I say no, absolutely no, positively no, definitely no and a thousand times no, do not purchase TIPS. I recommended TIPS because the principal was guaranteed by the Department of the Treasury and because the value of the principal was guaranteed to increase every six months to match the increase in the Consumer Price Index (CPI). Unfortunately, the CPI is a squishy, malleable and bendable number that is often massaged by Congress.
I’ve said often that there are three kinds of statistics: lies, damn lies and government numbers. The first two are media lies (advertising). We all know how that works. Government numbers reflect Congress’ political, social and economic agendas. Most folks know that every congressman lies (listen to a congressman being interviewed by the media) to justify government programs and expenditures to the voters. Congress lies with impunity because it knows that most Americans lack the ability to understand the numbers, lack the knowledge to challenge the numbers and don’t have the power to do a thing about it. Complaining to Congress is like complaining to the cops about police brutality. So retirees, who are strangled by low certificate of deposit rates and suffering cuts in Medicare programs, are now getting their senior butts kicked again as Congress changes the CPI numbers to reduce annual inflation increases in their Social Security checks. However, one of the few members of Congress I trust told me last February that the Treasury may be coming out with a floating rate bond in which the interest rate will move higher when rates rise and lower if rates fall. These bonds might be preferable to TIPS. Sell those TIPS, because you shouldn’t trust the CPI numbers.
There are millions of dollars in unclaimed pension plan benefits held by the Pension Benefit Guaranty Corp. (PBGC). They’re just lying fallow and waiting for the rightful owners to claim them. And according to the PBGC, the average claim is a few dollars and cents over $6,500. The PBGC guarantees pension payouts to private-sector workers if their plans fail (up to certain limits) or if their companies have gone out of business. It provides an online pension search directory at http://search.pbgc.gov/mp/mp.aspx. The PBGC also has a publication (no cost) called “Finding a Lost Pension,” which can be found at http://www.pbgc.gov/documents/finding-a-lost-pension.pdf. However, I prefer to do it the old-fashioned way and let my fingers do the walking; you can dial 800-400-7242 and request that a copy be mailed to you. Good luck!
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