#retirement #pensions #401(k)s #SocialSecurity
“It’s clear there’s a retirement crisis,” Illinois State Treasurer Michael W. Frerichs told small business owners. “This is a problem not only for families but for all of us,” the quote continues.
Frerichs was quoted in an Associated Press article on the subject by Maria Ines Zamudio. It was published Feb. 22, 2017, in The Atlanta Journal-Constitution.
Zamudio’s article focused on how seven states – California, Connecticut, New Jersey, Maryland, Oregon and Washington, as well as Illinois, are in various stages of implementing state-sponsored retirement savings plans.
The plans, the article says, are tax-deductible IRAs with automatic payroll deductions, for which employees don’t pay federal taxes on the money until it is withdrawn.
Americans without work-sponsored savings plans are less likely to save for retirement, the article says. Zamudio quotes research from the Employee Benefit Research Institute that shows 62 percent of employees with an employer-sponsored savings plans had more than $25,000 in savings. Some 22 percent of those had more than $100,000 in savings.
Meanwhile, according to the quoted research from 2014, 94 percent of workers without access to those plans had less than $25,000.
We can certainly debate whether it should be the government’s role to set up savings plans for workers. What isn’t really debatable is that $25,000, or even $100,000, won’t get a person very far into retirement.
A good retirement savings would provide enough so that the person or couple could live comfortably off the interest and dividends those savings would kick off. If one does not have to touch his principal in retirement, he’ll never outlive his money.
Of course, those fortunate enough to get a pension from their employers, combined with Social Security, have a little more to work with, in terms of income.
But will those vehicles be enough to have the retirement you want?
Retirement should be about more than just living Social Security check to Social Security check. It should be about having the resources, combined with the time, to do things one didn’t have the time to do while working. Examples include travel, hobbies etc.
But so many at or near retirement age are not in that position. Some had signed on to work for an employer because of pension benefits, only to find that when the time came to access those benefits, they weren’t there.
Others, perhaps, were forced out of their jobs prematurely through downsizing, technology or other efficiencies. As a result, they lost of lot of work time that could have allowed them to save more. Or, they were forced to take a lower-paying job elsewhere, making saving for retirement impossible, or nearly so.
If you are among those facing tough decisions about retirement – perhaps you tell yourself you’ll have to work until you die – there are a number of good options for earning income that could augment or even enhance your potential retirement income. To check out one of the best, message me.
Meanwhile, if you have a job, make saving for retirement a priority. Closely examine where your money goes, and see whether you can trim spending to put money into retirement savings. Presume that there will be very little to bail you out if you are “retired,” but can’t afford to be.
Also, too, think about your time. How are you spending what free time you currently have? How will you spend your time when you retire? Will you be bored? Will you have the resources to perhaps do what you’d like to be doing?
Certainly, retirement is about more than money. But having enough money will take one worry off your plate so you can decide how best to use your time.
If you don’t want to work until you die, do something today to help eliminate that possibility.
Peter
Tag Archives: states
YOUR PROMISED PENSION MAY SHRINK OR DISAPPEAR
When you were young, did mom or dad ever promise you something important, and not deliver? Or, did they give you something, but it wasn’t what you thought you were going to get?
Government entities have promised their workers, in most cases, a pension. Pension benefits, some of which are quite generous, are one of many reasons people take government jobs, often at lower salaries than they could make in the private sector.
But states, cities, counties and, yes, the federal government are all worried they may not be able to keep the promises they made to those workers.
Government revenue is down. Government workers are losing their jobs in relatively large numbers. And some public officials are taking action to ease their pension burdens.
Allysia Finley interviewed San Jose, Calif., Mayor Chuck Reed for an article in the Nov. 30-Dec. 1 weekend edition of The Wall Street Journal. Reed sees the crisis in the city’s pension obligation. It is now spending $45,263 each year per worker on pensions, according to the article. Reed sees that as unsustainable.
He is offering workers a choice: pay 16 percent more of your salary toward your pension – about 27 percent of a police officer’s salary – or accept lower benefits in the future. The choice circumvents state court decisions that protect workers’ vested pension rights. In other words, he can’t take their pensions away totally, but he can put more of the burden on the workers and less on the city.
The public employee unions are not too happy with this idea, as one might expect. Reed’s and other ideas from administrators and elected officials nationwide all but ensure that if you are young, and work for a government entity, chances are very good that you will not see the retirement benefits your older colleagues are seeing today.
Or, you’ll have to contribute more toward those benefits. Either way, government entities cannot sustain the status quo forever.
So, if you are that young, government worker, you have to begin thinking differently about retirement. Perhaps you will have to work longer than you’d planned. The idea of retiring with full benefits after 20 or 25 years of service – no matter how old you are – may not be in the cards. Yes, there are some jobs – firefighters and police officers, for example – that may not allow you to work past a certain age. So, you have to think differently.
That pension may not be enough for you to pursue a hobby, or second career, at your leisure, while you are relatively young. Instead, you may have to start now to set up your situation well ahead of retirement. You might even be able to set up something that won’t require you to work another job in your off time.
You hear people talk about investing and saving at an early age. That would be wise, but your government salary – and/or paying more for your pension benefits – may not allow as much flexibility to save much. Even if you can put away $5 a week, plus most, if not all, of any raises you get over time, and not touch it, you could have a pretty nice nest egg. Will it be enough?
There are lots of good ways to earn extra income while you are still on the job. For one of the best, visit www.bign.com/pbilodeau. If you and your friends in the same situation could lock arms, you all could not worry about making Reed’s choice, or deal with your promises not fully delivered.
Young folks in the private and public sectors all have to worry about how they will be employed for as long as they want to work. Unpleasant circumstances may intervene. Promises may be broken. If you presume they will happen, you can better prepare. Fighting valiantly to keep the status quo, as your union representatives and others may do, ultimately could be a waste of energy. Complaining about it is even a bigger energy waster.
Good things can come to those who prepare. The writing is on the wall. Eventually, Reed or some of his compatriots in government will reform pensions. Their decision(s) probably won’t benefit individual workers greatly. But they could benefit everyone into perpetuity. So get ready. Take action. Your future may depend on it.
Peter