First Person: Retirement Planning After Losing a Pension

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One of my closest friends works for the government and longs for the day when she can retire with her fat pension check. My retirement planning is much different since the company I worked for decided to do away with the pension plan for employers about a decade ago. Since I had not been working for the company for very long, I was told my pension check would amount to less than $10 a month. Now, I know any amount of money can help a person on a fixed income, but even that's a stretch.

Maxing out my Roth IRA

My friend is in her mid-30s but still hasn't started a Roth IRA account. She feels secure knowing she will get a guaranteed income for life after she retires due to her pension. I started investing in a Roth IRA when I was 30, but have no idea how much income I'll receive from it when I retire in another 20 to 25 years. For me the key is to live below my means. Meanwhile, my friend has a stressful job which causes her to overspend.

Working as long as possible

While I plan to work as long as possible, my friend wants to retire as soon as she can. Her plan is to retire at age 58, while I plan to keep working the rest of my life. I may slow down if I make it to my 70s, but I won't ever completely retire unless I'm disabled. We have a different attitude about work since her job is emotionally and physically draining. I enjoy what I do, which motivates me to keep working.

Sticking with the same job

My friend feels as though she can't leave her government job because of the pension benefits. However, she can get a master's degree and essentially take a promotion with higher pay. Once she achieves a higher pay, she will have the added bonus of higher pension benefits when she retires. I am free to job hop since I'm not counting the years until I am eligible for a pension plan.

Enjoying solid investment returns

Although I won't have a pension, I will be able to take money out of my 401(k) when I'm older. Even though I don't like the fact that I can only invest in certain mutual funds and target-date funds in my employee-sponsored retirement account, I can't complain about the returns. During the stock market's recent bear market, the value of my retirement account plunged. However, in recent months, I've made back all my losses and gained more. I feel secure with my 401(k). Since I won't have a pension check every month, I do my best to save as much as I can into my 401(k).

Although my friend has a pension and I don't, we both share the same apprehension about the Social Security system. We don't know if our Social Security benefits will be cut dramatically or completely eliminated by the time we retire. I'm not sure if I'll end up with more money by investing on my own, but I know I'll have enough to maintain my current lifestyle.

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