Comstock's magazine 1119 - November 2019 | Page 61

WHAT IF YOU DON’T HAVE A PENSION?
Nationally, only about 13 percent of private-sector
workers are covered by a pension, a dramatic fall
from the peak of 46 percent in 1980. By contrast,
47 percent of private-sector workers are in de-
fined-contribution arrangements like an individual
retirement account or 401(k). That number is set
to grow: Under a 2016 California law, starting next
June all businesses with more than 100 employees
must offer their workers a retirement plan, and by
June 2022 all businesses with more than five work-
ers must do so. Businesses can give their workers
access to the state’s CalSavers’ Roth IRA at no cost
to the business. (More than 4.6 million Californians
are members of state and local pension plans; public
workers make up almost a quarter of the Sacra-
mento region’s workforce.) For those entering that
or another defined-contribution plan offered by an
employer, here are tips from the U.S. Department of
Labor and the Consumer Federation of America on
taking advantage of what these plans offer.
proposal, largely because the agency concluded that it didn’t
use reasonable actuarial assumptions.
But the trustees could submit a revised proposal that in-
cludes similar cuts. Something has to give: As of April, the
pension was projected to run out of money to pay full bene-
fits by 2031. Its trustees referred questions about next steps
to Alameda-based attorney Sun Chang, who told Comstock’s
she’s not able to share information about the trustees’ strat-
egy for paying full benefits beyond that year. Leaders of sev-
eral local unions that participate in the plan didn’t respond
to requests to speak about the fund’s problems and how it
would affect their members.
Multiemployer plans elsewhere are in even worse
shape. The Road Carriers Local 707 Pension Fund in New
York, for example, covered workers in jobs similar to those
in Automotive Industries. When the fund collapsed in
2017, almost half its 5,000 plan participants lost 50 per-
cent of their earned plan benefits. More than half of the
10.6 million people covered under multiemployer plans
are in one with a funded ratio lower than 50 percent, ac-
cording to Tom Reeder, a former director of the federal
Pension Benefit Guaranty Corporation, which partial-
ly insures retiree benefits when plans fail. (Automotive
Industries was 53 percent funded as of January 2017.)
And in July, PBGC director Gordon Hartogensis issued
a release calling the multiemployer system “in crisis.”
1. Get in early. The magic of compounding
means at a conservative growth rate of 5 per-
cent, $100 a month saved starting at age 21
turns into $191,000 by age 65. Use automat-
ic paycheck deductions, which forces you to
save regularly.
2. Take advantage of the employer match. If
your employer matches your contributions
up to a set limit, contribute up to that limit —
the employer’s portion represents a 100-per-
cent return on your investment.
3. Save more as your earnings rise. Ideally, in-
crease the percentage of your earnings that
you save each year. A great time to boost
your rate is after a raise.
4. Rebalance your investments every year. You
can allocate your savings between stocks,
bonds, cash and so forth. When one of these
classes rises faster than the others, it can
comprise a bigger portion of your portfolio,
so reallocate every year to return to your
original percentages (some plans do this
automatically).
5. Don’t bail out. Many people cash out their
retirement when they change jobs. Don’t be
like them — roll your account over to the plan
offered by your new employer.
— STEVEN YODER
November 2019 | comstocksmag.com
61