I Received a Packet About My Pension from My Employer
In today's ever-changing retirement landscape, many employers are deciding what to do with their defined benefit plan or pension. Employers are opting to provide their employees with a defined contribution plan, such as a 401k. These types of retirement accounts are based mostly on the employee's contributions with the employer deciding on how much they will contribute. These formulas are much easier to calculate for employers.
As employers are deciding to eliminate their pensions, they are providing options to their employees. Some common options are:
An employee is allowed to roll over their pension balance to an Individual Retirement Account (IRA). In this situation, the employee would be able to direct their investment choices. They can do this on their own or hire someone to do this. This option offers no guaranteed income to the employee.
The second option is to find a product that will offer some guarantees. There is no shortage of these options, typically an individual annuity product. In general, an annuity would provide some sort of guarantee for future income. We will cover annuities in another post. This option will also take some time to compare products to assess future income options.
A third possible option that some employers may offer is to allow an employee to keep their money in the current plan with no more contributions going into the plan. They will give the employee a fixed rate of return and income at retirement.
At the end of the day, it is not an easy decision. This decision will have an impact on your retirement income projections, and sometimes your decision is irrevocable. Many employees choose to hire a fee-based advisor who is a fiduciary. Fiduciaries are required to
