Advanced Personal Finance

The company I work for froze our pensions a couple of years ago. Now there’s rumor that retirees will soon lose their health benefits (these kind of rumors are almost always right). People here and elsewhere bemoan these developments and heap curses upon our executives for cheating them out of their retirement benefits.

I hate to be the one to break this to you…

Pensions and pension benefits are gone and they’re not coming back.

I don’t say this in a snooty ‘I’m saving for retirement, why didn’t you’ tone. You think I like losing money and benefits? Hell, no. I think it’s tragic. But it’s a fact.

I feel particularly bad for people around 50 in situations like this. What’s left of their pension isn’t nearly enough to live on and they probably haven’t been saving in a 401(k). If they have, those savings simply haven’t had much time to compound.

Is there any hope?

For people caught in the gap between ‘enough time to save on their own for retirement’ and ‘we got our pensions,’ there’s sadly little for them to do. Sure, there’s the catch-up provision on IRAs and 401(k)s. But there are still two problems with that - most people don’t contribute enough to get to the regular IRS maximum and even if they did, $5,000 (for a 401k) or $1,000 (IRA) more per year just ain’t that much.

For everybody else, check out this simple way to calculate if you’re saving enough for retirement. If you’re not, there’s still time. The Roth 401(k) is good for saving - use it. Put money away in your IRA. Do what you can, because relying on the promise of a pension is not a plan.

401k, ira Roth

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This entry was posted on Thursday, June 14th, 2007 at 1:10 pm and is filed under IRA, Benefits, Retirement, 401(k). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.