What happens if the company you worked for goes “belly up’?  Can the company you worked for terminate your plan?  What can a Boomer plan on?

photo credit: patrick h. lauke

Employers can end a pension plan through a process called” Plan Termination”.  There are two ways an employer can terminate a pension plan.  The employer can end the plan in a “standard termination” but only after showing the Pension Benefit Guaranty Corporation (here after referred to as “PBGC “) that the plan has enough money to pay all benefits owed to the participants.  The plan must either purchase an annuity from an insurance company (which will provide you with lifetime benefits when you retire) or if your plan allows, issue a one lump sum payment that covers your entire benefit.

What if the plan is not fully funded?

If the plan is not fully funded, the employer may apply for a distress termination if the employer is in financial distress.  To do so however, the employer must prove to a bankruptcy court or to the PBGC that the employer cannot remain in business unless the plan is terminated.  If the application is granted, the PBGC will take over the plan and pay the plan benefits, up to the legal limits, using plan assets and PBGC guarantee funds.  (Under certain circumstances, the PBGC may take action on its own to end a pension plan without an application if it determines that there is not enough money to pay benefits currently due.)

If a single employer pension plan terminates without enough money to pay all the benefits, the PBGC will take over the plan and pay benefits through its insurance program.  Most participants and beneficiaries receive all of the pension benefits they would have received under the plan, but some people may lose certain benefits that are not guaranteed.   

Guaranty “Limits” of the Pension Benefit Guaranty Corporation

The PBGC pays pension benefits up to certain maximum limits.  The maximum guaranteed benefit is $4,500 per month, or $54,000 per year, payable in the form of straight life annuity, for a 65 year old person in a plan that terminates in 2010.  The maximum benefit may be reduced for an individual who is younger than 65.  The maximum benefit will also be reduced when a benefit is provided to a survivor of a plan participant.

PBGC Maximum Monthly Guarantees (see: PBGC Tables)

What is Guaranteed by the PBGC?

The PBGC does guarantees “basic benefits” earned before a plan is teminated, which includes:

• Pension benefits at normal retirement age
• Most early retirement benefits
• Annuity benefits for survivors of plan participants
• Disability benefits for a disability that occurred before the date the plan terminated

What is not Guaranteed?

The PBGC does not guarantee certain types of benefits.

The PBGC does not guarantee:

• Benefits for for which you do not have a vested right when the plan terminates, usually because you have not worked enough years with the company.
• Benefits for which you have not met all age, service, or other requirements at the time the plan terminates.
• Benefit increases and new benefits that have been in place for less than one year.
• Benefits in place for less than five years are only partly guaranteed.
• Early retirement benefits that are greater than payments at normal retirement age.
• Health and welfare benefits.
• Vacation pay.
• Severance benefits.
• Lump sum death benefits for a death that occurs after the date the plan ends.
• Disability benefits for a disability that occurs after the plan’s termination date.
• Lump sum payments exceeding $5,000 are generally not paid.

Even if certain benefits are not guaranteed, participants and beneficiaries still may receive some of those benefits from the PBGC depending on how much money the terminated plan has and how much the PBGC collects from the employer.

In Summary

In summary, your pension benefits are guaranteed to legal limits by the PBGC, other benefits not considered part of the actual pension plan such as health care insurance, life insurance, vacation benefits, and severance payments are not considered part of a pension plan and may not necessarily be covered.  So, …When they say nothing in life is guaranteed! … They are wrong!  PB.

What happens if 70 becomes the new 65?  How does it affect you, the workplace, and your plans for retirement? Are Boomers re-shaping the economy, or is the economy re-shaping them?

photo credit: Squid!

Could 70 be the new 65?  It may have to be for some!  One effect of the recent volatility of the financial markets is that many Americans are electing to postpone their retirement.  If 70 becomes the new 65, it will result in many changes to the workplace.  These trends could affect you, your employer, and your financial future.

Retirement will no longer be an event.  It will become a process.  If 70 becomes the new 65, more people will probably leave the workplace gradually instead of automatically at age 65.  This may not be that bad for baby boomers that want to stay active and engaged.   A manager or VP who was used to working 50 hours a week may become a consultant or a coach working less than 8 hours a day or maybe three days a week.  He/she might simply want to work less, for less pay, but not be ready to call it quits.  He/she may wish to make a lateral move within a company that would allow an exit on his/her terms.

Will more Boomers have the opportunity to shape their exit?

More and more expect “mature” employees to negotiate the terms of their retirement.  As gradual retirement becomes more common, so will the options and alternatives.

• How many hours they will work on their way out?
• How accessible they will be?
• Will they work from home or the office?
• Who will take the reins from their hands someday?
• If a boomer offers a personal exit plan that will help a business to cut labor costs without losing a valued employee, isn’t that a favor to management?

Tough Decisions For Businesses and Government Organizations.

In June 2009, the Bureau of Labor Statistics estimated that 23% of Americans employed or seeking work were age 55-64.  The 2009 Retirement Survey from the Employee Benefit Research Institute found that 51% of Americans age 25 and older now think they will retire at age 66 or older. 

Universities, state and local governments and public agencies will probably not see the same kind of retirement turnover they did in the past.  For businesses, who want to pay older workers to retire so that they can stay profitable in this economy, this could become a problem.  Organizationally, what is the economic value of retaining wisdom and experience?  Should they stop or slow down the recruiting of new managers, new faculty, or new administrators for the near future?

Will There Be A Wave Of “Re-hirement”?

In the EBRI survey, of the roughly 1,200 respondents 20% felt they would never retire.  This compares to 11% in the 2007 poll.  Part of that increase reflects what happened in the stock market, but it also may represent a perception shift in progress.  Baby boomers, as a group are doers, proud contributors to society who are re-shaping the old retirement template.

Changes Boomers Can Believe In!

Two distinct phases of American life seem to be emerging.  The first phase is one in which you work for a “living”.  That is followed by the second in which you work for “meaning”.  A wave of mature employees, professionals and entrepreneurs may be one result, but is another possibly return to the past?

Is this a real change to the culture of the recent past where people continue to retire at an earlier age?  Could it result in a cultural change unlike any this country has never seen?  … Or maybe it is simply a return to a work ethic that this country had at one time, …by a large group of  people, who had it, … but for a while seem to have lost it?

Boomers are back and the work ethic taught to us by our fathers is really starting to show.

As for Papa Boomer, I gave it up at 54.  Didn’t have the option of three days a week,  just a lot less money.  Given some of the options above, I might go back in a flash.  In the mean time, … I’ll just spend seven days a week … b%#&ching …blogging about it!  PB.

Personal experience in choosing retirement Locations.

I remember when I left the company I worked for for 33+ years and had not quite yet decided to retire.  I was testing the waters for nice locations that I could continue my career and eventually retire.  I was approached by recruiters on more than one occasion to relocate to this exact area.  I thought they were nuts and would not even consider an interview.   A couple of my friends also actually moved to the Benton Harbor/ St. Joe area  when they relocated to Whirlpool Corporate Headquarters.   They stayed just long enough to get another job before they had to survive the next winter.  But, let’s try to be fair and visit St. Joe anyway!

Welcome to St. Joseph Michigan

One of the first things mentioned on the  the Home  Page for City of St. Joseph is that it is only 90 miles from Chicago.  That doesn’t sound real encouraging!  St. Joseph, also known as St. Joe, is a deep water port town that is part of a chain of small towns stretching in an arc along the southern portion of Lake Michigan.  It is a community of 8,800 people within the larger Benton Harbor/ St. Joseph area of 162,000 people.   The St. Joseph Lighthouse stands in the middle of the port activities.  Some call  St. Joe “The Riviera of the Midwest”.   I haven’t quite figured out that connection yet.  Take a tour!

According to Newsweek Showcase.com, ” Given Michigan’s reputation as a land of harsh winter weather, it is safe to assume that it will never be a destination of choice for retirees desiring to live in a warmer, more hospitable climate”  It goes on to say, “While the seniors migrating to Michigan to spend their retirement years may be minimal, there are obviously substantial numbers, in fact the vast majority of Michigan residents, who, upon retirement, choose to remain here, either to take advantage of the affordable cost of livng or remain close to family and friends”.  I guess if you decide you have to stay in Michigan, compared to the rest of the state, St. Joe ain’t so bad!

Things to do?

Golf – Summer only.  There are several golf courses in the area.  I actually played a few of them myself.  Every golf course I played in Michigan was green and lush and in very good condition.  I was told they all stay that way because they don’t get the extended play throughout the year due to the weather.  Fishing – good.  Water skiing – you are kidding, we are talking retirees!  Shoveling snow – plenty to keep you busy!

The Weather!

Weather in the winter Blows!  Today is Monday January 12, 2009.  The forecast for the rest of the week in St. Joe is best summarized as this follows:

The Positive Side … this Publicity Picture!

I was considering leaving this space blank!  But, living is affordable.  If you don’t want to be bothered by unwanted visitors most of the year, it could be a good place to retire.  If you are from Michigan and plan to stay, it is one of the best places to retire in the state.  If you need to make a little money on the side,  in the winter you can shovel snow!

And finally,  If you are a strong believer in Global warming, it may be the place to retire … in a few thousand years!

The Negative Side … the rest of the pictures!

Too cold more than half the time!  Read all of the above!

Summary

Retire on the water!  St. Joseph, Michigan?  You gotta be kiddin! … Not Me!

I’m not saying it is the worst place to retire on the water, but it is definitely not one of the top 6 or 6000.  In fact, I love the water, and if I owned a home there and was  getting ready to retire, I would probably sell it and move to Florida , South Carolina or anywhere else I could enjoy the water at least half the time.  Or, maybe that’s just Me!  Papa B.

Also Read:

If Michigan is too cold, consider retiring in a foreign country.  Fellow baby boomer blogger Go To Retirement shares about retiring in Panama.  Check it out!

Related Acticles:

1. Retire by The Water – Dunedin, FL.
2. Retire by The Water – Beaufort, SC.
3. Retire by The Water – Sequim, WA.
4. Retire on The Water – Marble Falls TX.

When the Dow Jones was at 14,000, was your financial advisor tops on your list to send your holiday card to?  Now with Dow hovering around 8500, do they even make your list.  Or is it easier to not open your statements and pretend that they don’t exist.  It’s always easy to like your financial advisor then times are good and your portfolio is making money.  According to a study done by Phoenix Wealth Survey, many high net worth boomers are now making their own financial decisions.  There reason?  They don’t see the value the advisor brings to the table to justify the cost.

Boomers Attitude Changes

During down economic cycles, boomers tend to look closer at their relationship with their advisor.  Where fees and commission may been an afterthought during the Bull Market, with the recent market collapse many question what value they are really getting.  Despite the current lack of confidence in their advisors, many speculate by 2010 that many of these boomers will be seeking council again with many of the sunset provisions being lifted.  They will be forced to pursue advanced estate planning issues that for now can be pushed to the side.

Surprising Boomer Concern

On every past survey amongst boomers, the primary concern has been the increasing cost of health care.  Now what tops the list as the Boomers #1 concern is inflation or purchasing power.  Where $1 million dollars use to be a significant amount (believe me, it still is), many are now worried that it won’t be enough to last them through their retirement years.

All this sums up to mean that boomers will need advisors to help them make difficult decisions when it comes to retirement planning.  I’m sure when the markets settle, and things are back to normal, the issue of fees will be pushed backed to the side and instead focus on what matters most: their financial health.