Pensions - What Should I Do ?

lost girl asked:


What is all this? HOw do u invest? What r Stocks? What is the ultimate thing to do with 10,000. How do u invest it so that u have lots of money in 40 years. looking for info

Ryan

Wally Bock asked:


Next time you’ve got a bunch of senior managers in a room together, ask those who are eligible to retire within five years to leave the room. Then figure out how you’re going to replace them.

That’s an exercise I’ve done with senior management in a client company. A full third of the senior people in that room were eligible to take their pension and go within five years.

This is not just a problem in the executive suite. Check out the senior people in sales. Check out the team leaders for key craft functions, the people who usually came up through union apprentice programs.

There are several definitions of the Baby Boom and they all vary a little. But you’re safe if you assume that it’s people born between 1946 and 1964. In America, that’s about 79 million people.

The oldest boomers hit sixty in 2006. In 2011 they’ll start hitting sixty-five.

I call their exit “The Boomer Brain Drain.” It’s not likely that they’ll all retire when they can and they certainly won’t retire all at once, but enough of them could start heading for the exits soon enough that you’d better know how you’re going to deal with the Brain Drain in your organization.

There are three things that make this a difficult problem for you. They are lead times, pipelines, and human complexity.

If you need a graduate engineer to fill an entry level position in 2011, when a senior Boomer engineer retires and people bump up the pipeline, that graduate engineer needs to be in college today. The same is true for skilled craft positions where people come through an apprenticeship program.

The people in the pipeline now constrain what you can do with people replenishment in the short term. In the long term, finding enough engineers and craft workers will be a problem that needs to be tackled by the whole industry or country.

Note, though that the overall number of people in the pipeline is less than the number of people who could be retiring. That’s because the generations following the Baby Boom are smaller.

This shortage is even greater in several key kinds of work. The number of people getting engineering degrees has been falling for years. So has the number of people in apprenticeship programs.

People are not interchangeable parts. That’s a joy for most of us most of the time, but it can create problems for you as your Boomers start to leave.

Bill’s a guy that everyone likes. He’s easy to talk to. He’s good at what he does in the distribution part of his company. When people have a problem, they call Bill, and he almost always knows who to call or what to do to help.

Kaye’s been in the same clerical job for over twenty years. She’s good at what she does. People know that Kaye’s the one to call if you’ve got an administrative problem. She knows who to talk to at headquarters to set things right. She also knows just how far you can stretch the limits of any company policy.

When Bill or Kaye retire, you can fill their position, but you can’t really replace them. Bill’s problem solving ability has developed over years. So has Kaye’s knowledge of policy and headquarters staff. And they both have relationships that are impossible for any newcomer. When they leave that special knowledge and those relationships go with them.

So what should you be doing? Start by doing what I call a “Threat Assessment.” Take a look at every position in your company. Concentrate on the ones where the incumbent is eligible to retire soon. Evaluate your ability to fill the slot with a qualified person.

Then put together a task force to take a long term view of the situation. You’ll find that solutions to the Boomer Brain Drain fall into three basic areas.

Some solutions will be Human Resources (HR) solutions. These include improved recruiting and succession planning.

You may decide that you want to allow some people to work beyond their retirement date or to return to work after retiring. That may mean you need to adjust pension and retirement rules.

You may also need to make adjustments to increase flexibility for your “retired” workers and you may need to change some materials and equipment to make them easier for older workers to use. If you’ve got union workers, you’ll need to negotiate with the unions.

Consider some business process changes to meet the threat of the Boomer Brain Drain. By streamlining processes or eliminating some steps altogether you may be able to maintain excellent performance with fewer people.

Investigate equipment issues, too. By simplifying and standardizing equipment, you may be able to achieve similar results with fewer workers or increase your scheduling flexibility. If part of your plan involves having more older workers, make sure that equipment and support materials are comfortable for them to use.

Finally consider some technological solutions to knowledge retention. Artificial intelligence, smart systems, and Knowledge Management (KM) are appropriate for some larger companies.

Companies of all sizes should look for ways to use technology to help people do a better job of knowledge sharing, learning, and problem solving. Social networking systems can help people find experts. Simple discussion systems can facilitate the sharing of shoptalk and the learning that goes with it.

The blanket that overlays all of this is culture. As you make changes in procedures and in the mix of people and technology in your workplace, you need to pay attention to your culture.

Culture, in the classic Deal and Kennedy definition, is “the way we do things around here.” Culture is the way you think about older workers. Culture is the things you reward and the things you only notice. If you change your workplace and the mix of people in it, you will almost certainly need to change your culture.

In the end you need an integrated system to deal with the threat of massive Baby Boomer retirements and the potential Boomer Brain Drain. You need to assess your situation. You need to use a mix of human resources and business process changes. You need to make judicious use of technology and you must factor culture into the mix.



Lillian

Moneyman asked:


Over the past few years, final salary pension schemes have witnessed volatility in equity markets and a retired workforce that is living longer. Add the two together, and what was once a healthy pension scheme became a huge liability, carrying significant deficits.

To reduce the liability, one by one, companies closed their final salary schemes to new members. The rules of some existing schemes were also amended to require higher contributions to be made.

This means that the number of employees retiring with a pension that pays around 50% of their final salary is forever reducing, and is a trend that will not be reversed. Granted, the number of people staying with the same firm to amass forty years of service to qualify for the maximum pension is also reducing. Greater movement in the labour market will also be a contributing factor in lower pensions at retirement.

So where does this leave employees? Companies that have moved away from final salary pension schemes have turned to offering defined contribution or money purchase pension schemes. Here the employer and employee pays contributions into the scheme, more than likely based on a percentage of current salary. The premiums are then invested in pension funds that can range from with profits to UK equities to Far East funds. At retirement the amount in the kitty depends on the level of contributions but also on how well the funds have performed, increasing the risk to the employee.

The big difference is the level of contributions paid into the respective schemes by the employer. A typical final salary scheme may have received 15% - 20% from the employer with employees paying 5% or 6%. The money purchase scheme will require the employee to contribute at a similar level but the employers premium may have reduced to 5% also, that is to match the employees contribution.

It gets worse still for the employees whose company now offers a stakeholder pension scheme, whereby the employer contribution may be in the range of 0% to 3%.

It’s not difficult to see the impact this has on the pension pot. With contributions to money purchase schemes at least 50% lower than final salary schemes the amount of income it generates will drop by a similar amount. This could be less than the amount required to live on.

So from having 100% of salary many people face the prospect of receiving one quarter of that amount. Where does this leave employees in this situation? Well, neither option is easy to swallow. First, you work longer, putting back your early retirement at 55 to a more realistic 65. Another ten years at work definitely doesn’t appeal. The second option is to save more. Not always doable with rising living costs such as mortgages, utility costs and petrol, but saving as much as possible will help. For those lucky enough to be just starting out at work, the best option is to start a pension (or savings plan) as soon as you can.



Mary Jo

Brian asked:


I am trying to do some long term planning as to how much money I need to retire. Some people have told me that Social Security is not taxed. Others have said that a government pension is not taxed. I understand the taxes around 401K’s and IRAs. But the tax question around SS and government pensions will make a huge difference in my planning calculations.

Savannah