| |
In years gone by, when someone retired from a large company they
didn’t have to worry about losing their retirement benefits. That’s
no longer the case. Being faced with ever increasing competition,
many large companies are changing their benefit programs. If this
hasn’t affected you yet, it soon will. Read on to find out how.
Did you know that it costs General Motors over $1,000 per vehicle
just to cover retiree benefits? A few years ago, a steel company
only had 20,000 current employees but had over 70,000 former
employees receiving retirement benefits. This is causing companies
to cut costs everywhere they can, including cutting or eliminating
some retiree benefits.
Retirees are understandably nervous. But not all of your company
benefits are at risk. For those retired, you shouldn’t be too
concerned about losing your pension. A pension is the retirement
benefit that is designed to pay the retiree a set amount of money
each month for the rest of their life. Should your old employer go
belly up there is little chance your pension will be affected. In
these cases, the Pension Benefit Guaranty Corp. takes over the
pension payments.
You also aren’t in danger of losing your 401(k). Even if the company
declares bankruptcy the money in your 401(k) is safe—unless you had
it all invested in company stock!
For those still working, you need to know that many companies are
now terminating their pension programs for current employees, or
requiring their employees work much longer to qualify. That means
that more often, it is up to the employee to fund their own
retirement out of their paycheck. Few are ready for this.
To put this in perspective, let’s say you are 40-years old and have
finally gotten serious about saving for retirement. You want enough
so you can live off the interest--$50,000 per year. In order to
retire at age 65, you will have to save over $20,000 per year!
The benefits most likely to be affected for retirees and current
workers alike are medical benefits. Companies across the board,
including large ones like General Motors, are reducing or
eliminating the medical benefits that are available to retirees.
Current workers are being expected to shoulder more and more of the
health care burden. Retired or not, you will be faced with higher
co-pays, larger premiums and reduced coverage. As a result, you must
be prepared to pay several hundred dollars more each month for this
coverage.
For instance, I have clients who retired from a major chemical
company. A few years ago they only had to pay $60-$70 a month for
health care coverage. Now it is costing them several hundred dollars
a month. Fortunately, they have the money to pay it. Many don’t.
So what should you do? Retirees relying on company medical benefits
need to be prepared for the real possibility that they will be
reduced or disappear. This may change your financial situation so
you need to keep it in mind when choosing investments. Avoid those
with long time commitments and penalties to access your money.
Non-retirees need to realize that now, more than ever, it is their
responsibility to provide for their retirement. Live below your
means and set aside all you can.
Nationally-syndicated financial columnist and Certified Financial
Planner® Jeffrey Voudrie provides personal, in-depth money
management services and advice to select private clients throughout
the USA. He’ll answer your financial question – FREE at
www.guardingyourwealth.com. |
|
