3. Private pensions are nearly extinct
Only a few decades ago, many large employers offered “defined-benefit” pensions, guaranteeing retirees and their spouses a fixed monthly payment for life.
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Times have changed. The Bureau of Labor Statistics says that in 2011, just 1 in 10 large employers offered fixed benefit plans, covering 18 percent of private industry employees. (By contrast, many government positions at all levels still offer pensions.)
A report by global advisory company Towers Watson says that, by late 2013, only 24 percent of Fortune 500 companies offered new employees any type of defined-benefit plan (most were “hybrid” plans, not traditional fixed-payment retirement plans) compared with 60 percent in 1998.
Most of us, if we’re lucky, instead have tax-deferred 401(k) retirement savings plans that we need to keep track of ourselves, instead of being managed by experts.
Tip: Save more. Without a pension, you simply need to save more for retirement. Follow the basic rules for retirement savings, including minimizing taxes, working longer, investing regularly and keeping on top of your investments. Invest the savings in indexed funds, which typically outperform actively managed mutual funds or investing the money yourself.
Boost savings by every possible penny. Keep increasing 401(k) contributions to meet your retirement goal. Don’t have a goal? Use several retirement calculators to decide how much you’ll need and what to save to get there. Here are two calculators:
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