“GE’s Pension Freeze Highlights the Need for Financial Planning”

This past week, GE announced that it is freezing pensions for 20,000 employees with salaried benefits in attempts to reduce its pension deficit which is already $8 Billion!  Thankfully, current retirees who have already started taking pension benefits are not affected, and no new hires have been enrolled into the plan since 2012.  This move by GE is not only a defensive play to address their multitude of financial difficulties, but it also highlights the demise of the old school pension plan and highlights the need for individuals to take their retirement planning into their own hands. Who Do I Rely On? Since the 1980’s pension plans have been significantly reduced across many US corporations.  Historically, workers could enter into a defined benefit plan which sacrificed some of their current earnings for “guaranteed” retirement earnings later in life.  Depending on a retirees age at retirement, the pension benefits for these employees could be as high as 90% of their final salary.  However, as these pension plans have gone away, people are left asking the question of who they can rely on for their retirement.  The answer is to do as much as possible for your retirement in accounts that are completely in your control. Where do I Invest Outside of my 401K If clients are going to do as much as they can in accounts that are completely in their control, then the natural next question is what accounts to use.  Once an individual has maxed out their company’s 401K contributions (and taken advantage of any matches!) then they should consider investing into a Traditional or Roth IRA account.  For many different reasons, we recommend first starting with a Roth IRA which will provide some tax diversification for their retirement income and will also provide them more flexibility on how much they withdraw during retirement. It’s All Too Complicated! At this stage, most people’s eyes gloss over and with everything else happening in their lives, they decide that it’s all too complicated and hard to do.  With two working spouses, and two little ones at home myself, I completely understand this mentality.  However, you owe it to yourself and your family to take the small steps now for large benefits later.  This is where having a professional advisor working with you to keep you on track and provide sound and relevant advice is so important. If you, or someone you know, has questions similar to these then reach out today to speak to one of our advisors!

October 11th, 2019