Tag Archive | "changes in pension plans"

You Can’t Trust Anyone Else With Your Retirement

There used to be a bond — of sorts — between a corporation and its employees. You worked hard, did your best, and in return, the company was there for you — at least nominally — when you needed them, like when you retired and they promised to pay your pension for life. Those days are long gone — unfortunately — and the only thing you can be sure of anymore is you can’t trust anyone else with your retirement.

You can’t trust anyone else with your retirement

And here’s a great example to prove the point:

Verizon retirees have sued the phone company because it’s planning to transfer the responsibility of paying their pensions to an insurance company, where they will have weaker legal protection.

Verizon Communications Inc. said last month that it would transfer $7.5 billion of its pension obligations, covering 41,000 management retirees, to Prudential Insurance. The deal effectively turns the company’s defined-benefit pensions into annuities.

And Verizon’s reason for doing this?

When it was announced, Verizon said the deal lowers the risk that its pension obligations will end up costing more than projected.

In other words, Verizon did a miserable job of risk analysis and projections when they evaluated their pension obligations and are now trying to shift responsibility for their miserable business management onto the backs of their employees.

The employer/employee contract was shattered a long time ago — and it wasn’t the employees who broke it. If you want to have any hope of being comfortable and secure in your golden years, you can’t trust anyone else with your retirement.

Click here to learn more about why you can’t trust anyone else with your retirement.

Posted in Planning for Your Retirement, Retirement Plan Challenges, Saving for RetirementComments (0)

Should You Take Your Pension as a Lump Sum

Traditionally, pension plans were set up to pay retirees monthly payments for life. Now, if you’re lucky enough to still have a pension plan, corporations are attempting to divest themselves of that responsibility as well, with the option of a lump sum payment. Should you take your pension as a lump sum? Let’s see.

The right financial choices make for a secure and enjoyable retirement.

Should you take your pension as a lump sum

One question to ask in making this decision is “what’s in it for the company.” Why would they want to give you a big chunk of money instead of monthly payments?

…employers are increasingly looking to “de-risk” their pension plans. The idea is that if more participants accept lump-sum payouts instead of monthly checks for life, companies can cut their pension costs and reduce their long-term liabilities.

As with the failed 401(k0 experiment, employers — in order to increase shareholder value — want to put the burden of your retirement onto you. That’s great — if you’re ready, willing and able to take that responsibility; but most of us are not. And, neither the companies we work for, nor the financial planners whose services they make available to us, care whether we’re financially educated or not. In fact, it’s in their best interest to keep us financially ignorant, so we’ll trust them and make whatever ridiculous financial choices they suggest to us.

But while de-risking may be the right move for a company, the question for you is whether you’re better off locking in payments for life or accepting a bundle of cash that you can invest and draw on throughout retirement.

Only you can make that decision and the more you know the better your decisions will be. Should you take your pension as a lump sum? Only you can decide.

Click here to read more about lump sum pension payouts.

Posted in Planning for Your Retirement, Retirement Plan ChallengesComments (0)

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