How To Protect Yourself In Case You Lose Your Pension
June 30, 2017Over the last few months I have talked to a lot of people who are concerned that their company’s pension plan has changed for the worse, and I have a hunch the next few months will see more of the same. The state of Michigan is considering a complete overhaul to their teacher pension plan, placing the majority of the retirement savings burden on teachers, a trend I see only increasing as state and local governments face budget woes.
These are people from many different employers all across the country. Many others have seen an employer’s pension plan get frozen, terminated, or taken over by the PBGC. What was just a generation ago almost a “given” has become increasingly rare, and even when it exists there is ever increasing skepticism about the long term viability of the pension plan.
What can be done?
- If you have a pension…be thankful.
- Then, be prepared to see it change between now and retirement (even if you are retiring in the near term).
- Most importantly, take control of your financial life & get yourself in a position where no matter what actions your employer takes regarding the pension plan, you can retire comfortably.
OK, that sounds like reasonable advice, but how do you do that?
How to take control
In order to do it yourself, here are two things that will help you prepare:
Have a plan! Aka, think big picture.
- Understand when you want to retire, how much you’ll spend, how much income you will have, and the financial resources available to you. (Get help from a financial planner if needed)
- Run a retirement calculator to get a sense of where you are tracking toward your long term goals. Determine how much you need to save between now & then.
Dig in to the details. This only takes a few minutes, so don’t be intimidated. But do make the time.
- Understand your current budget and where your money goes. Where can you save more? Where can you spend less?
- Make sure your investment dollars are invested for optimal growth without too much risk. Do you have the right mix of stocks, bonds, cash and other assets?
When you have a fairly clear vision for your future, you can take actions that will help you reach your goals without feeling like you’re leaving your employer in control. Start with your big picture, dig into the details, and take control of your financial life. If your company pension goes away, gets frozen, gets taken over by the PBGC, or just never existed in the first place – it won’t matter because you will have prepared yourself for the future with or without your pension.
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