Taking Stock of Your Retirement Plan

As more companies make a pension switch, you may find that you have lost ground. Here's what you can do to preserve your nest : egg.

401(k) accounts in an attempt to make up for reduced pension benefits as a result of the switch as well as to hold on to employees. Others are providing transitional benefits for employees nearing retirement, allowing them to stick with their old pension or boosting an older employee’s opening account balance.

In this new environment, employers are now saying that workers can expect their retirement funds to come from three sources: personal savings, employer-sponsored plans and Social Security. And you, the employee, will probably have to foot the biggest chunk of your post-career cash.

So what should you do? It’s imperative to take the time to craft a sound retirement strategy by developing a formula that helps you determine when you can afford to stop punching the clock. The following are some guidelines that may help you:

  • Know how your benefit program is structured. If you are unsure about whether your company has converted from a traditional benefits plan to a cash balance program, immediately contact your employee benefits administrator. Get your company to fully explain components of its retirement program and, if necessary, get them to calculate the current value of your package or issue a statement. At that time, you query officials regarding how the company computes your pension.
  • Figure out how much you need to retire. Once Lila Robinson, an administrative assistant in AT&T’s transaction services division, evaluated her benefits program, she figured out how much she would need to retire comfortably. She’s currently working on a plan that would prepare her for life after work-a nest egg worth roughly $1 million. The 48-year-old mother of three-ages 28, 21 and 19-is currently taking advantage of both her company 401(k) and cash balance plans, in which she has made contributions of $20,000 and $10,000, respectively. Also, Robinson has used her IRA to develop a blue-chip portfolio. “When AT&T converted to a cash balance plan, I [was fortunate enough to have] a manager who had a financial background and was willing to go over the information with employees to help them understand how the plan worked, what the benefits were and reassure us it was safe,” says Robinson. “What I like about the plan is that the money is portable and you can also tap into the funds for emergencies, to buy a home or finance education. I was able to borrow against the funds in my 401(k) and cash balance plans to pay for my daughter’s college education. The interest rate was lower than if I had taken out a commercial loan.”
    While Robinson knows her pension money is there for the taking, she plans to pay back any loans and reinvest her money. She adds: “I’m saving to build a nice financial cushion, especially since I plan to retire well past the traditional age of 65.”
  • Supplement your retirement income. Nicole Johnson-Reece took stock of her losses when she left AT&T-and took action. You should, too. “We’re looking for better, more flexible ways to maintain our cash and
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