By Craig Erwin, Ph.D.
When I quit the first job I had after college at Trane Company, I thought nothing of it. I was two years away from being vested, so if I had stayed two more years, I could have drawn a pension upon retirement. I quit so I could go back to school. After finishing another degree I didn’t even consider going back to work for my first employer. However, that might have been wise because the three years I had already spent working for Trane would count towards my pension. Instead I started working for a different company, one that didn’t offer a pension, but instead allowed employees to save money for retirement in a 401(k) plan. When I retire, I won’t get a pension, but I wish I had known more about pensions and I wish I had sought employment with an employer that offered a pension. I know people who are getting pensions, including my father and neighbors, friends, and relatives. I am jealous. A pension makes a big difference. Without one, you need to save aggressively because all you will have to retire on is what you’ve saved and invested and Social Security (which isn’t enough).
I asked a student of mine about a decade ago what she wanted to do after she graduated. She told me that she wanted to work for the state. I asked why. Because she could get a good pension with many state jobs. I had never heard a student talk about seeking employment with a pension. She was wise beyond her years. A pension can make life much easier in retirement and can allow some to retire early.
Pensions are no longer common, as they once were in the USA. Job seekers need to look long and hard to find employment that comes with a pension. So, what should you do if you’re unlikely to get a pension when you retire? Start saving as soon as you start working to prepare yourself to finance your own retirement.
If you realize that all you have to survive after retirement is Social Security and whatever you have saved and invested, hopefully you will save aggressively and invest in assets that will grow in value, such as stocks, bonds, and rental real estate.
So, when you next seek employment, ask lots of questions about retirement plans. If they offer a pension, jump for joy. If they don’t (which is almost certainly the case), ask lots of questions about what the employer offers in terms of retirement savings plans. Be sure to ask if they match what you save too. And find out how many investment choices you have, so you have flexibility and can get a good return on your savings.
But know that you are likely on your own. If you want to retire comfortably (or even early), you need to plan and save and invest. The good old days when you could rely on your employer to provide you a cushy, long, retirement are long gone. It’s up to you. Don’t blow it!
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