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Disappearing Company Pension Plan & What You
Need to Know
Dr. Greg Ketchum, 10/01/05
A couple of months back Hewlett-Packard announced
they were laying off 14,500 workers and “dismantling”
their pension plan. That is, they will stop
contributing to their pension plans and new
employees will not be eligible for a pension.
HP’s move is a good example of two trends impacting
company retirement plans.
- Ending “Defined Benefits” Plans: Here,
the company funds the retirement plan and the
benefit that you receive is a “defined amount.”
Like HP, many companies are phasing out or “freezing”
these plans. HP expects to save $300 million
a year by doing this. Who makes up the difference?
Shift to “Defined Contribution”
Plans: Here, you make the contributions
to the plan, your employer may or may not
match them and contribution you make is defined,
not the benefit you’ll receive. Many companies
are moving to plans such as the 401(k).
Does It All Mean to You
Companies are shifting responsibility for
your retirement to you. Now planning and saving
for retirement is up to you. That’s good news
in that you’ve got more choices as to where and
how to invest your retirement money, but bad news
in that most of us don’t have a clue how to manage
our money short-term, let alone plan for retirement.
What Should You
The most important step: get actively involved
now in planning for retirement even if you’re
young or don’t have the cash to put away currently.
Don’t put it off getting involved and planning
Here are some steps you can take right now
to get to work on your retirement plan.
- Educate Yourself: Start with the free
handbook “Protect Your Pension: A Quick reference
Guide” available for the US Dept. of Labor.
- Check Your Employer Plans: Make sure
you understand what type plans your employer
offers and be sure to take maximum advantage
of what is offered. Some employers match your
contributions but you can’t get that money if
you’re not contributing.
- See a Financial Planner: Start by requesting
a Free Financial Planning Resource Kit from
the Certified Financial Planner Board of Standards,
Inc at http://www.cfp.net/learn/requestkit.asp
Consider working past age 65. The longer
you work the less you’ll need to save for your
retirement. Baby boomers are redefining the
very concept of retirement. In fact, a recent
article in Newsweek captured the change in attitude
towards retirement with this quote from a Baby
Boomer, “Boomers don’t see retirement as freedom
from work but as freedom to choose what’s next.”
For more information and a list of retirement
planning references go to talentplanet.com and
click on Dr. Greg.
®2005 All rights reserved. Gregory
A. Ketchum, Ph.D.