A Few Tips from the Author
The articles cited above tell an extremely disturbing tale of broken promises, pensions in peril, and crying needs. The last one tells about action the Senate recently took to try to reverse the problem. What none of these articles tell you is what you, as an individual, can do to avoid some real problems in retirement. I suppose if I did a search on some related topics, I could find some suggestions from professionals, but I'll leave that as an exercise for the reader, if he/she wants to do it. What I intend to present below are some little things that I've noticed since retiring that might be of some help to you ... or you can ignore them, if you like. I certainly don't claim to have all the answers, just a few tips that might interest you.
1) If given a choice, I'd select taking my pension money as a lump sum instead of opting for long-term monthly installments. When I retired, I had the choice of taking the money in a lump sum or in monthly installments for as long as I lived. If I wanted to extend the payments to go to my surviving spouse after my death, I would get a slightly smaller amount. I decided to take the lump sum, since I obviously had no idea how long I'd live, how long my wife would live, or whether some unforeseen event (e.g., bankruptcy) might endanger the pension fund. One of the dangers of taking a lump sum is that while the monthly installments are more or less guaranteed, the investment of a lump sum might be lost due to stock market dips, etc. I chose to trust myself and relieve myself of the worry about future pension fund problems.
2) Company stock savings plans are great ways to increase your annual income, assuming you don't lose the money due to control restrictions. If you decide to join the stock plan, be sure to check the rules on who has control and when you actually own the stock. There have been several situations (e.g., Enron) where employees invested in company stock, but then weren't allowed to sell the stock when prices started to fall. In the case of Enron, I heard that while company officers were dumping their stock, employees were being told that things were solid and that they should continue to buy the stock. In another case, employees retired with large amounts, in the millions of dollars, in stock, but weren't allowed to sell it for some prescribed period of time. During the waiting period, the value dropped drastically, and they were left with virtually no retirement fund.
3) It seems 401(k) plans also may have some control questions. Before going too deeply into investing in them, check the rules. If there's a company matching amount, find out when it actually belongs to you.
4) Take advantage of the annual IRA contribution allowed by the IRS. This is a great way to put aside a little tax-free money while you're making the big bucks and paying the big taxes, then pull it back out after you retire when your tax rate is lower. The amount you're allowed to contribute seems to be changing every year, so keep your eye on the IRS rules to make sure you take full advantage of this option.
5) Keep current on legislation being considered regarding the Pension Benefit Guaranty Corporation and pensions, in general. Let your congressman know when there are changes being considered that affect you.
6) According to the "Crying Need" article in USA Today, "Every employer with a troubled plan is required to tell the PBGC each year how underfunded the plan would be if it had to be terminated. But the company is not required to tell the people directly affected: workers and pensioners. The PBGC is not allowed to tell." This would seem to be an area where the laws need changing. If the opportunity arises, bring this up to your congressman.