When Benefit Cuts Sabotage Your Retirement Plans

One of the consequences of all of the turmoil in our economy over the last few years has been companies reducing retirement benefits. Whether you are happily married, divorced, or divorcing, this can have major repercussions – especially for women.

I’d like to introduce Susan.

Sadly, Susan’s story is not unique. She represents millions of American women who have made responsible financial decisions all their lives and now find themselves facing potential ruin because the retirement plans they so diligently invested in are being cut. Susan writes:

Even though we have planned and built careers that include sacrificing higher pay for a better retirement plan, now 27 years later, those plans are being cut and health care scaled back. At the same time, current pay has been frozen for 5 years and benefits scaled back. The largest part of our retirement was supposed to be from Army reserves and public teacher pensions. Both are being cut. So, how can we ever know what to expect and how much can we afford to invest now at this late stage? It just seems that all the career decisions we made 30 years ago have turned out to be quite risky.

When you factor in rising healthcare costs and many employers’ decision to scale back health insurance benefits, the prospect of retiring in present day American can be daunting.

Susan goes on to ask the question that seems to be on everyone’s mind, “How do you plan for that much uncertainty?” This is a question that has been asked by countless women sitting across my desk – some with tears in their eyes, some flashing with anger, but all of them scared of an uncertain financial future.

One thing I encourage my clients to do is take control. Become educated about your company’s retirement plans and your options for withdrawing funds. Many company plans allow “in-service rollovers” for current employees who are age 59 ½ and above. An in-service rollover can be a means of removing your money from a risk position in a company-sponsored or company-controlled plan into a safer position with you in the driver’s seat. Often, you can leave the employer plan open and continue to take advantage of company matching on new contributions.

Secondly, investigate your options when it comes time to choose a pension payout. Most people blindly accept the company plan’s lifetime income option, but the truth is you can almost always do better with a private annuity plan funded with your pension’s lump sum option. Not only does a private annuity often provide more income over time, your income will be contractually guaranteed and protected by reinsurance and state level guarantee funds.

Lastly, do not allow yourself to be blind-sided by the cost of skilled care in your later years. Some people are resistant to adding an expense during retirement, but Long-Term Care insurance is one of the wisest purchases you can make. The cost of nursing homes and assisted living centers is already on its way from steep to astronomical. Spending hundreds of dollars each year in premium may very well save you thousands per month down the road.

~ by Cathy DeWitt Dunn

If you would like to speak with Cathy to discuss your retirement plans, please call 972-473-4700 to schedule an appointment.