Some American workers - approximately 48 million full-time employees - have no pension benefits at all.  Their companies do not even offer a retirement-savings program.3

Are You Sure You will Receive a Pension?

Over the last five years, American companies have terminated more than 640 under-funded retirement plans, affecting about three-quarters of a million people.4  Even companies with healthy pension plans have made changes.  Between 2001 and 2004, 23 percent of Fortune 1000 companies announced that they would freeze or consider freezing their defined benefit pension plans.5  In January, IBM - once famous for its generous benefits - said it would freeze its U.S. pension plans in 2008 and shift employees to its 401(k) programs. 

According to The Wall Street Journal, workers most at risk are:

• in companies with a large percentage of older, longtime employees.
• those not covered by a collective-bargaining agreement.
• in companies that have a history of cutting retiree benefits.6 

Your financial future does not have to be dependent on the benefit policies of your employer.  A plan will help you save and invest.  Here are some strategies for you to consider:

• Estimate your financial needs.  Assess how much money you need to fund your retirement lifestyle.  Factor in potential healthcare costs as well as day-to-day living expenses. 
• Create an investment plan with specific goals and a personalized asset allocation strategy that includes all your retirement savings vehicles.  Avoid concentrating in a single security or sector of the capital markets.  Likewise, do not spread yourself too thin; if you invest in too many different funds, you can undermine your own objectives. 
• Leverage your employer-sponsored defined contribution account.  Fund your 401k or 403b plan to the maximum, and take advantage of every penny that your employer will match.
• Invest in as many tax-advantaged accounts as you can.  Individual retirement accounts (IRAs), as well as 401k and 403b plans, offer tax-deferred growth.  In a traditional IRA, you pay taxes only on your investment gains when you make withdrawals and, if you qualify, your contributions may also be tax-deductible. 
• Increase your savings rate.  2005 was the first year since the Great Depression when Americans spent more money than they made.7  To help you make a habit of saving, enroll in automatic investment plans or use dollar-cost averaging to invest fixed-dollar amounts at regular intervals.
• Minimize future taxes by allocating investments between taxable and non-taxable instruments. 
• Build on your gains.  By reinvesting all interest and dividends, you can leverage the power of compounding - the growth of earnings on earnings. 
• Educate yourself.  Because you are being asked to take on a greater role in investment decision-making, it makes sense for you to read everything you can about finances and investments.

A pension may be uncertain, but you don't have to rely on having one.  Talk to your financial advisor to find out what you can do about your specific situation.

¹ Private Pension Plan Bulletin, Abstract of 1998 Form 5500 Annual Reports, U.S. Department of Labor, Number 11, Winter 2001-2002, Table E1.
² Private Pension Plan Bulletin, Abstract of 1998 Form 5500 Annual Reports, U.S. Department of Labor, Number 11, Winter 2001-2002, Table E1.
³ "Congress May Focus on Retirement Funds," The Wall Street Journal, January 4, 2006.
⁴ "The Best Retirement Tools," The Wall Street Journal, January 7, 2006.
⁵ www.americanbenefitscouncil.org/documents/definedbenefits_paper.pdf (see page 6 of white paper)
⁶ "How Safe Is Your Pension?" The Wall Street Journal, January 12, 2006.
⁷ "Goodbye, Holiday Splurges.  Hello, Saving." The Wall Street Journal, January 1, 2006.

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