What To Do If Your Pension Freezes

It’s never a good thing when you hear someone talking about pension freezes. Fortunately, there are some steps you can take to minimize the negative effects of this action and preserve your retirement finances. The smartest move than any employee can take is to become more active when it comes to preparing and saving for retirement. The following are just few of the potential steps you could take. Take a look and see how you use them to your advantage if a pension freeze occurs.

Pension Freezes

Read Everything on Your Pension Plan

If you want understand the scope of a pension free then you, as an employee, should take the time to read the documents that are given to them once the employer has made their intentions for a freeze public. You should also attend any information sessions that are offered by the company. The point to remember is that not every frozen plan will operation in the same manner. There will be differences to consider. You should do everything you can to understand how yours does.

For instance, there may be certain provisions in the documentation that allow for an easier transition or provide enhanced 401(k) contributions in order to compensate for the benefits originally offered with the pension. Simply by reading the summary plan description, you can grasp the different between how things operated before and after the freeze took effect.

Run The Numbers

If you make use of the figures and formulas that are listed in your plan’s documents, you can calculate what will be distributed through frozen pension. In this case, you will probably have to consult your earlier tax records to get your past income numbers. This should help give you some perspective on the quantitative differences.

Don’t Just Rely on Your Pension

You should increase the contributions to your 401(k), 403(b), or other contribution plans. Then again, you might want to focus more on contributions to your Traditional IRA or Roth. The goal is really about saving more for retirement if the pension plan does end up getting frozen. This covers your back. In a related matter, be sure that you’ve captured the maximum matching employer contributions.

Thinking About Your Employment Options

When the security of a normal pension plan is removed, it may be better to consider changing employers over the course of your working years rather than sticking with one job the whole time. Of course, not having a pension is not a good enough reason by itself to change jobs. There are other considerations like salary, health benefits, and other retirement benefits that may outweigh the loss of the pension incentive.

Seeking Financial Advice

It may make sense to talk to a financial or retirement saving professional in order to get the best advice about what to do if your pension freezes. There may be courses of action open to you that you hadn’t considered earlier.  Your goal is to do what you can to secure you retirement savings for the future not stumble into a bad financial situation that will ruin your chances.

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