Another old-guard pension plan bites the dust. Check out today’s headline straight from the Motor City:
"GM to Freeze Pension Plans of White-Collar Workers"
That’s right, General Motors announced that starting January 1, 2007, it will freeze accrued pension benefits for its approximately 42,000 U.S. salaried employees under the current defined-benefit plan formula and begin a shift toward defined-contribution plans, such as 401k plans.
GM is just the latest high-profile example of corporate America’s move away from defined-benefit plans (which place the financial risk on the employer) to defined-contribution plans (which place the financial risk and responsibility for management on the employee). Let’s face it, one day all of us will be completely responsible for managing our own retirements, and that means that the burden of generating income for your retirement is on you. And you know what — in my opinion, that’s the way it should be.
I don’t know about you, but I don’t want anybody else responsible for my life but me. That’s not to say that you can’t get rational advice and assistance in managing your money, but what it does mean is that you cannot be passive and hope that the corporation or the government will take care of you in your golden years. It’s not going to happen, and the sooner you come to this realization, the more time you’ll have to prepare and nurture your nest egg.
I see retirement investing as a process of roughly three phases. The first phase is the growth, or accumulation, phase. That’s when you are saving and investing in your retirement accounts in preparation for the time when you’ll need it. It is critical here that you form the good habits that will allow you to maximize gains in bull markets, and minimize gains when the bears are in control.
The second phase is usually between ages 55 to 60, or when you are about five years away from retirement. Here you need to start thinking about a strategy of growth and income. You want to take a little bit less risk, and minimize those sleepless nights that the stock market can sometimes impose upon us.
The third phase is when you are in your seventies and beyond, and that is when generating income is the overwhelming purpose of your investing strategy.
My Successful Investing service will help you maximize gains in phase one, while helping you transition into phase two. My High Monthly Income service will take you from phase two and into phase three by showing you how to position your assets for both capital appreciation and capital preservation. I invite you all, whatever phase you’re in, to check out my services.