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The 2016 Retirement Manual

There's never been a more important time than now to learn the basics of personal finance. It used to be that government and employers could be counted on to provide for your retirement. No longer. Defined-benefit plans are going the way of the dodo, and so, too, could Social Security.

Resistance is futile
This transition has not been without pain. Most recently, the Transport Workers Union in New York City went on strike to protect a generous pension plan that allows workers with a 25-year tenure to retire at age 55 and earn half their salary for the rest of their lives.

Accounts have the strike ending in a stalemate, but my guess is that the pension is not sustainable.

Trust no one
Then there are the employers that go bankrupt. When this happens, pension liabilities are transferred to the Pension Benefit Guaranty Corporation (PBGC), an arm of the federal government. But there are some shortfalls to this model. The PBGC caps payouts at approximately $45,000 per year. And there are no health-care benefits.

There are also companies that aren't yet bankrupt, but whose pension plans are woefully underfunded. According to Standard & Poor's data, S&P 500 companies face $150 billion of unfunded liabilities. Some of these companies -- like ExxonMobil (NYSE: XOM  ) -- could cover their liabilities with the cash they have in the bank. Others, such as GM (NYSE: GM  ) , will need billions -- likely in the form of more debt -- to meet commitments. Combine their obligations with these companies' declining businesses and you see disaster in the making for would-be retirees. Both IBM (NYSE: IBM  ) and Alcoa (NYSE: AA  ) took steps this month to end their pension plans.

Pension obligations have the potential to destroy businesses when times get tough. That's why you see newer companies like Southwest (NYSE: LUV  ) and JetBlue (Nasdaq: JBLU  ) creating defined-contribution plans such as 401(k)s for employees. They've learned from the mistakes of their predecessors. In these plans, the only guarantee is the amount of money that goes in -- not the amount of benefits paid out. This eases the burden on employers, but increases the burden on employees to make sure the savings are put to good use.

Soon, and possibly by 2016, all Americans will be managing their own IRAs, 401(k)s, and maybe even health savings accounts (HSA). When that happens, it will be up to you to know some finance.

Know thyself
But ask yourself: Is there anyone you would rather trust your retirement to than you? As comforting as it is to think that there is an omniscient and beneficent god of retirement out there, neither the government nor your employer are capable of being that deity.

Neither cares about you or your future in anything more than an abstract way. Neither knows the details of your life, health needs, or retirement timeline. That's why managing your own future can make that future better.

When you're in charge of your own money, you pick where and how you want to invest. Risk-averse? Short timeline? Consider a bond fund such as Managers Fremont or a low-cost index such as Vanguard Total Stock Market (FUND: VTSMX  ) . If you have a longer timeline, you can learn to pick individual equities and amass a nice nest egg as you try to beat the market year after year after year.

The Foolish bottom line
Scared? Don't be. Help is all around you. For starters, The Motley Fool offers all kinds of resources to help you better manage your money. From choosing the best mutual funds for your money to allocating your resources in the most efficient way to helpful tips to save on taxes and reduce paperwork, Rule Your Retirement is your one-stop retirement planning shop. Personal finance guru Robert Brokamp can help you get your retirement on track or supercharge it if you've already started saving. Click here to take a free trial and have a library of retirement content at your fingertips free for 30 days. There is no obligation to subscribe.

The decline of passive retirement planning is not so much a problem as an opportunity. You can make your future as bright as you want it to be.

Tim Hansonowns shares of VTI, the Vanguard Total Stock Market exchange-traded fund. JetBlue is a Motley Fool Stock Advisor recommendation. No Fool is too cool for disclosure ... and Tim's pretty darn cool.


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