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Guarding Your Wealth for Seniors
Are Your Company Retirement Benefits in Jeopardy?
By Jeffrey D. Voudrie, CFP
Oct. 26, 2005 - In years gone by, when someone
retired from a large company they didn’t have to worry about losing
their retirement benefits. That’s no longer the case. Being faced with
ever increasing competition, many large companies are changing their
benefit programs. If this hasn’t affected you yet, it soon will. Read on
to find out how.
Did you know that it costs General Motors over
$1,000 per vehicle just to cover retiree benefits? A few years ago, a
steel company only had 20,000 current employees but had over 70,000
former employees receiving retirement benefits. To survive, companies
have to cut costs everywhere they can, including cutting or eliminating
some retiree benefits.
Retirees are understandably nervous. But not all of
your company benefits are at risk. For those retired, you shouldn’t be
too concerned about losing your pension. A pension is the retirement
benefit that is designed to pay the retiree a set amount of money each
month for the rest of their life. Should your old employer go belly up
there is little chance your pension will be affected. In these cases,
the Pension Benefit Guaranty Corp. takes over the pension payments.
You also aren’t in danger of losing your 401(k).
Even if the company declares bankruptcy the money in your 401(k) is
safe—unless you had it all invested in company stock!
For those still working, you need to know that many
companies are now terminating their pension programs for current
employees, or requiring their employees work much longer to qualify.
That means that more often, it is up to the employee to fund their own
retirement out of their paycheck. Few are ready for this.
To put this in perspective, let’s say you are
40-years old and have finally gotten serious about saving for
retirement. You want enough so you can live off the interest--$50,000
per year. In order to retire at age 65, you will have to save over
$20,000 per year!
The benefits most likely to be affected for
retirees and current workers alike are medical benefits. Companies
across the board, including large ones like General Motors, are reducing
or eliminating the medical benefits that are available to retirees.
Current workers are being expected to shoulder more and more of the
health care burden. Retired or not, you will be faced with higher
co-pays, larger premiums and reduced coverage. As a result, you must be
prepared to pay several hundred dollars more each month for this
coverage.
For instance, I have clients who retired from a
major chemical company. A few years ago they only had to pay $60-$70 a
month for that coverage. Now it is costing them several hundred dollars
a month. Fortunately, they have the money to pay it. Many don’t.
So what should you do? Retirees relying on company
medical benefits need to be prepared for the real possibility that they
will be reduced or disappear. This may change your financial situation
so you need to keep it in mind when choosing investments. Avoid those
with long time commitments and penalties to access your money.
Non-retirees need to realize that now, more than
ever, it is their responsibility to provide for their retirement. Live
below your means and set aside all you can.
If you have a specific question or would like more
information give me a call toll-free at 1-877-827-1463 or go to
www.guardingyourwealth.com. You can also reach me by email at
jeff@guardingyourwealth.com.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Please
visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive.
Guarding Your Wealth for Seniors are
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens. Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For booking information, email e-mail
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