If you company has recently frozen or ended its pension plan, you have some important decisions to make with your retirement.

First of all, know that the money you have contributed to the plan is safe. If you have received notice of changes to your employer’s pension plan, it usually just means that no further contributions will be made to the plan. However, you are still entitled for what you have earned so far.

What this means is that going forward, how you plan for retirement and manage your money in retirement, will change significantly.

Instead of working to further increase your pension benefit, you will now need to save and invest in a retirement account such as a 401(k), or Roth IRA.

You’ll need to plan to save enough in these accounts and invest it appropriately to create a portfolio that can sustain steady withdrawals over your retirement that replace the reduction in pension income you would have received.

You may also receive a lump sum offer to cash out your pension or roll it into an IRA. This is a big decision not to be taken lightly.

While a large lump sum can be great to have and potentially give you the prospect for higher returns going forward, you are giving up a lot of safety and security and will now have to manage a large investment portfolio yourself.

While these new responsibilities come with a lot of potential pitfalls, there can be some great advantages too. You will have more flexibility in retirement, and opportunities to reduce your long term tax liability with a properly executed plan.

If you are uncomfortable with your new role as your own investment manager, this is a great time to reach out to a financial planner. We help retirees in situations just like this properly navigate these changes and ensure they are in successful long term plans.

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