First Person: I Don’t Need a Pension to Feel Secure

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I wasn't too upset when the company I worked for did away with its pension plan for employees several years ago. I was comfortable investing in a 401(k) instead. Also, I knew eventually I'd have the opportunity to roll the pension money over into an IRA that I controlled. My chance came when the company sold to a new company. I was able to roll the "lump sum" from the pension into a Roth IRA.

Not everyone wants to be a do-it-yourself investor. I was a surprised by a recent article by that suggested the do-it-yourself retirement has failed. The author cited a Bank of America Merrill Lynch 2013 Workplace Benefits Report that showed an astounding 4 in 5 employees would forfeit at least 5 percent of their salary if they could get a guaranteed retirement income. It is also interesting to me that nearly every employees surveyed believed their 401(k) plans should provided a guaranteed income option, according to a BlackRock study. Sure, I experienced a 401(k) wipeout during the recession, but also recovered and made huge gains by being patient.

Fixating on dividends

Instead of buying a fixed annuity, I find security by investing in stocks that pay a regular dividend. It's not guaranteed. I invested in one company that announced, just a few weeks after I purchased it, that it would be suspending its dividend. Some stocks pay more money in dividends than others. And, it's not exactly predictable income. Still, I rather receive dividends that can be reinvested if I don't need them as retirement income.

Automating my finances

I think the main reason people want a guaranteed income in retirement is because they are too lazy to learn about investments. Ironically, the best strategy I've found for building wealth is a completely slacker approach. I automate my finances by having money taken directly out of my checking account and saved in my Roth IRA account every month. I don't have to think about it expect once a year when I set the amount that I want to have transferred from my regular checking to my discount brokerage account. I love the fact that my money can grow in a Roth IRA, yet I don't have to pay taxes when I reach retirement age.

Funding my Roth 401(k)

In addition to funding a Roth IRA, I also contribute to a 401(k). A portion of the money I invest in the company-sponsored retirement account goes into a Roth 401(k), which means I have another way to receive tax-free income after I retire. My company didn't start offering the Roth 401(k) option until the last few years. I don't agree with financial analysts who call the 401(k) a failed experiment. I might not see a 20 percent return on my money every year, but over time I trust my 401(k) to deliver better results than a pension fund.

Maybe I'll be jealous of my friends and family members that receive enormous pension checks in retirement. It's possible. It's also possible I'll do just fine in retirement because I've diversified with everything from stocks and bonds to real estate and gold.

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