Tag Archive | "Pension Plans"

Retirement Is A Dream For Most Americans

Pension plans are – for most of us – a thing of the past. 401(k) plans are a disaster. The Federal government is making nasty noises about cuts to Medicare and Social Security. Sometimes is seems like government and big business are conspiring so that retirement is a dream for most Americans.

Retirement is a dream for most Americans.

Retirement is a dream for most Americans

With pension plans a distant memory, most of us — if we have any retirement savings at all — have money in a 401(k). But there’s a big problem with that and it’s virtually ensuring that most Americans will never have enough to retire.

The fact is, that it’s easy to take money out of your 401(k). Sure, there’s a penalty and you have to pay taxes on the money you withdraw, but when you need it, you need it and your 401(k) is a handy stash.

A large and growing share of American workers are tapping their retirement savings accounts for nonretirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs, and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

And now, as the Federal government attempts to get its fiscal house in order, we hear rumors of cuts to Medicare and Social Security.

With policy makers eyeing cuts to Social Security benefits and Medicare to rein in the soaring federal deficit, and traditional pensions in long decline, retirement savings experts say the drain from the accounts has dire implications for future retirees.

‘‘We’re going from bad to worse,’’ said Diane Oakley, executive director of the National Institute on Retirement Security. ‘‘Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans — which already are severely underfunded — continue to leak out at a high rate.’’

The fact is that the interests of working Americans have never been truly served — with very few exceptions — by big business or government and now it looks as though retirement is a dream for most Americans.

Click here to read more about why retirement is a dream for most Americans.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, Saving for Retirement, The EconomyComments (0)

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)

Learn About Retirement Planning from Pro Athletes

We all do it: Watch pro sports and wonder what it would be like to make that kind of money, do something you love, and then retire with a cushy lifestyle.

Turns out, retiring from a career as a professional athlete may not be as wonderful as we think it is. There are many pitfalls and there’s lots we can learn about retirement planning from pro athletes.

Retirement Plans for Pro Athletes and What You Can Learn From Them

First Steps

According to Andre Mirkine, president of the Sports Financial Advisors Association, “They’re (the athletes) not going to be able to put away in qualified retirement plans enough money to live on.”

Sound familiar? You’re not alone. Many – perhaps most – of us are in a similar position. We just don’t have adequate funds or time to fully fund our retirement. By the way, “qualified plans” refers to retirement options with tax advantages.

Step one. Figure out where to put the money you are able to save so it will do you the most good. There are lots of options which we’ll discuss in more detail in future posts.

Step two. Remember: if it sounds too good to be true, it probably is.

“Sometimes, former athletes run out of retirement savings chasing after wild investment deals,” says Pete D’Arruda, a financial planner who frequently advises athletes.  Enough said?

Step three. What do professional athletes’ options include that you should look for as you plan for your retirement?

  • Pension Plans. If you can find a company that still offers pension plans, you’re lucky. Incredibly lucky. Most have switched over to 401(k) plans, which benefit the company, but can really stick it to the employees. Major League Baseball pensions “are reputed to be among the most generous in sports.” Players receive full pension benefits after 10 years of service time and can be eligible for $200,000 a year for life at age 62. If you’re young enough and you have the skills, the MLB is the way to go.
  • Health Care Coverage. It’s tough to find health care coverage that carries over into retirement, but this can be a huge financial benefit as you age. For example, MLB members with at least four years of service can continue their health care coverage and pay only 60% of the cost of their chosen plan.
  • 401(k) Plans. This is the most common retirement plan currently being offered. The NFL offers players a 401(k)-type plan called the NFL Player Second Career Savings Plan. It provides an employer match of up to $2 for every $1 contributed by the player. Employer matches are the “goose that lays the golden egg” of 401(k) plans, both your contribution and your employer’s – and the profits from the investments – are tax deferred, the more your employer contributes the better off you are. But it’s not all roses, click here to learn how you may be getting burned by your company and the government.
  • Union Leverage. Players’ strikes. Management lockouts. As a fan, unions can be a pain in the neck. As an employee, however, many of the benefits we enjoy today are the result of union bargaining. In 1885, a group of nine players formed the Brotherhood of Professional Base Ball Players – and you know what they can do today, if they choose to. So, if there’s a union where you work, joining could be a good idea.

There are no shortcuts to retirement security, not even for professional athletes. But there are options that can ensure you get on – and stay on – the right path for a secure retirement and much we can learn about retirement planning from pro athletes.

Click here to read the article Go long: Retirement plans for pro athletes by Sonya Stinson | Bankrate.com


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