It could be argued that in the past, company pensions were the backbone of retirement planning. It wasn't long ago that every father and grandfather worked at steel mills or other large corporations, and had their future already figured out thanks to the guaranteed income that a pension would provide. In other words, they had it good.
Unfortunately, company pensions aren't nearly as secure as they once were. More employees than ever before are now finding themselves on the receiving end of bad news concerning their company pensions. If you'd like to know more about this phenomenon, and what retirement advice you should follow if you become one of these unfortunate pension holders, read on...
Pay attention to what happened with Kodak.
Like many companies before it, the Kodak Corporation recently announced that they had filed for bankruptcy. As usual, a huge focus has been on the number of jobs that may be in jeopardy, depending on what ultimately happens with the company. While this is obviously a huge concern for many people and their families, what typically isn't discussed is what happens to employee pensions. Many employees may find themselves not receiving the full pensions that they have been promised after years of dedicated work.
Kodak employees are not alone.
As previously stated, many employees over the years have lost their jobs and/or their company pensions due to businesses going under. Judging from experts in the field, they are not alone and more will very possibly follow. Between 2010 and 2011, approximately 300 underfunded company pensions from the private sector shut down. This doesn't bode well for the future, as this trend is expected to continue.
The Pension Benefit Guaranty Corporation can help.
The good news is that private companies are insured by the PBGC. What this means is that, in the event that a company fails to meet its pension obligations, insurance coverage will kick in. In other words, your pension will still be in effect; it will simply be from a different source.
However, there is a cap to what the PBGC will cover.
Although the Pension Benefit Guaranty Corporation can help in the event that a company's pension dissolves, there is a cap to what will be paid out. So while you would still receive a guaranteed income during your retirement, that amount may be sizably cut. While it should be noted that most pension plans are below the maximum amount dictated by the PBGC, many individuals will be affected by the cap.
Much worse if you're several years away from retirement.
If you're still several years away from retirement and your company pension shuts down, you may find a drastic reduction in your benefits, since you won't have those extra years to accrue more income. For example, if your company pension was to shut down 15 years before your expected retirement, you could lose nearly two-thirds of your yearly expected retirement income.
Retirement advice for those affected.
If you have a company pension, it doesn't matter whether you think you're safe or not. This is your future we're talking about. The best course of action is to prepare for a worst-case scenario. This means that you should create a greater savings by way of other types of retirement accounts. If you have access to a company-sponsored 401k, that would be a great choice. Or you might want to invest in CD's, IRA's, or a variety of other products. For the best retirement advice that will allow you to prepare for such an event, it would be wise to seek the help of a financial expert.Source: http://firstsecurityfinancialshow.com/blog/bid/115028/Lessons-for-Retirement-from-Kodak
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