 |
| Dad and I in 1987. |
THE GOOD OLE' DAYS OF PENSIONS.
I was in seventh grade when my dad retired from Bethlehem Steel. He was 62 at the time and I remember him saying that he realized he "was working for nothing" so he retired. And indeed, the family income rose a bit when he first retired. The family income was increased a bit more when a great aunt came to live with us and contributed a portion of her SSI as well.
Back then, you worked for a company for 30 years, retired with a full pension and all was well.
Well... almost. There was a darker side to this era. Most companies didn't fully fund their pensions. While I was off at College, Bethlehem Steel (BS) convinced the government to allow them to separate their pension system into an executive system and a rank and file system and (you guessed it) as soon as that was approved, they FULLY FUNDED THE EXECUTIVE PENSION SYSTEM and then DECLARED BANKRUPTCY! The "pension" that was so generous to Dad slowly eroded to the point that it barely covered Mom's MediGap policy at the end of her life, which she lived on only Social Security Income (SSI) at the end. Yes, there were other institutions in the community - assisted "senior" housing complexes and nursing homes for poor people - which allowed Mom to enjoy her remaining years, but it was a far cry from the benefits promised to my father during his working years.
Watching that unfold, combined with a book (I long forgot the title - something about the retirement problem in the USA) I stumbled across in the local library which told of the many ways corporations can screw folks on their pension systems, set the stage for some early "retirement" decisions I made as a fresh young employee.
MY RETIREMENT PLANNING OVER THE YEARS.
After receiving my PhD in Chemistry, I started at Exxon in late 1990. I had a good salary at that time, but it was based on my being a fresh graduate. Through a quirky change in their systems, I received my largest pay raise ever (14%) at the end of my first year... they had changed how they calculate salaries... your years at graduate school were now counted as "experience" and I went from being a PhD with zero experience to a PhD with 5 years experience. At that same meeting I was introduced to the "Exxon Thrift Plan" - a new sort of retirement supplemental system where you could save some of your own money (one of the early 401Ks). It was explained that in the future, retirement would be a "three legged stool" consisting of your pension, SSI and your own savings.
I have always had a cynical side and I had a hunch way back at that meeting that my own saving for retirement was going to be important and so I began back then by putting half that raise into the thrift plan. Over the next few years, each time I received a raise, I added another 1% of my salary to the regular contributions. It took me a couple of more years - some wasted because I didn't know anything about investing - but by the late-mid 90s, I was maxed out on 401K savings and investing it all in their growth stock fund.
One other thing to note during my Exxon years was I finally realized that credit card debt, fees and interest were eating us alive and after a failed attempt or two, we finally kicked the credit card habit in the late 90s.
When I left Exxon for IFF in late 1999, Exxon sent me a letter indicating that my 9 years of work there entitled me to a "pension" that might make a car payment when I was 65. I held onto the Exxon Thrift Plan and noted that IFF also had a 401K (run by Vanguard) which I immediately maxed out and invested in something called "S&P500 Index Fund". IFF also had a pension.
Two things happened during the next 15 years at IFF. First, they closed down their pension system in exchange for a (pitifully small) enhanced 401k match. I received a letter that the IFF pension for about 9 years would also perhaps make a car payment when I received it at age 65. The second thing was a divorce. I ended up loosing half of each pension, half of the combined 401k funds AND as a bonus prize, got to pay my ex $42K of alimony for the rest of my life. That's how they reward a woman for having an affair with the married financial planner handling her father's estate. (Yes, I'm slightly bitter.)
I joined Agilent in 2015 and learned that they had no pension for folks entering that year, but they had a 401k with a match. Again I maxed it out and also added the "Catch Up" contribution you're allowed to do on 401Ks after age 50. Through the magic of compounding interest, I'm entering retirement with a 401K balance that's not quite 10x my salary (which happens to be Fidelity's recommendation for retirement).
RETIREMENT TODAY
But... the phrase "I'm entering retirement" makes it sound like I'm a more active player in this decision. I am being laid off. I'm also learning that this is the new norm in the USA. Many people don't necessarily choose to retire... instead they experience some sort of job action (layoff, downsizing, assignment to a place they can't transfer to, or fired) and given the bleak job prospects of older Americans, they decide they are finished and begin the retirement phase of their life.
I'm actually quite lucky. Given my savings, I'm very well prepared for this. In fact, I was expecting to retire on my own around the end of the year. This layoff moved my retirement up a few months and with a standard severance package will have little effect on the resulting finances.
No comments:
Post a Comment