5 Factors That Could Put Your Pension at Risk
Simple mistakes that could go undetected for years, potentially costing you thousands of dollars
Last year, more than 100 pension plans failed. Even if yours isn't one of them, simple mistakes like your employer forgetting to factor in overtime pay or making a mathematical error could go undetected and compound for years, potentially costing you thousands of dollars over your remaining life expectancy. What factors put you at risk for these mistakes, and what can you do about them?
U.S. News talked to Rick Rodgers, a Pennsylvania-based certified financial planner, chartered retirement planner counselor, and author of The New Three-Legged Stool: A Tax Efficient Approach to Retirement Planning, for tips on making sure your pension is in shape, especially if one or more of these risk factors apply to you.
1. Your employer has gone through a merger or buyout.
If your company has merged with another company or has been bought out, that can change the equation (literally). "The old pension might have been based on a different formula, so sometimes they'll just apply the whole formula to the old pension," says Rodgers. "That gets messy."
The Pension Protection Act of 2006 requires plans to automatically provide individualized benefit statements, including total benefits earned and the vested accrued benefit or earliest date the benefit will become vested, every three years. If something seems amiss on your statement, start by requesting a copy of your plan document (not the summary plan description, since the U.S. Supreme Court ruled earlier this year that employers are not bound by the contents of the summary) and talking to your company benefits officer. "Even if you've been drawing for four or five years, you may get a retroactive check to make up for what you haven't been paid and an increase going forward," says Rodgers.
2. Your Social Security statement contains errors.
If Social Security lists inaccurate information such as the wrong number of years on the job and your employer uses those inaccuracies to calculate your pension benefits, it could also throw off your pension. Now that the Social Security Administration no longer sends out annual statements, Rodgers suggests holding onto your last statement and your annual W2. However, for a $15 fee, you can request your Social Security earnings information using form SSA 7050. The process for correcting mistakes varies, depending on what the mistake is.
3. You worked past age 65.
Some pensions do not give you credit for working past the age of 65, while others do. In the case of Social Security, the formula changes. If you're entitled to credit for working past 65, make sure you're getting it. "Oftentimes, we find that they stop accruing benefits or we find that they're allowed to start drawing from their pension even if they haven't retired," says Rodgers.
However, just because you're allowed to start drawing from your pension doesn't mean you should. The decision to start drawing pension benefits is often irrevocable, so Rodgers says it should be timed carefully. A financial planner can explain your options and help you make the wisest decision based on your situation.
4. You forget to alert your benefits officer about a life change.
Drawing pension benefits as a single person means higher benefits than drawing based on joint life expectancy, so anytime you marry, divorce, or lose a spouse, you'll need to update the benefits officer at your company. If you're married and do not want a pension based on joint life expectancy, your spouse must sign off on that decision. Not doing so may impact the amount of your benefit or may mean that your pension benefits go to someone other than you intended.
Rodgers points to a situation where a widower named his children as the beneficiaries on his pension, then remarried and never changed the beneficiary forms, presumably because he intended to continue with his children as beneficiaries. "When he died, his spouse was entitled to his pension because she did not sign off waiving her rights," says Rodgers. "The rule is that your spouse has to sign off or it automatically belongs to the surviving spouse."
5. You frequently change jobs.
Nowadays, many companies have stopped offering pensions altogether. But if yours does and you move jobs without taking a lump-sum cash-out, you'll want to stay in touch with your past employer and update your pension administrator any time you move. "You need to keep them apprised of changes of address and make sure you're getting statement updates," says Rodgers. "Even though you're not an active member of the plan, you should still be getting updates every three years."
If you think you may have accrued pension money that you've lost track of, Rodgers recommends going to NAUPA.org to check for unclaimed money. You can also check for deceased relatives, but the process of claiming that money is more complicated.
- How Couples Can Maximize Social Security Benefits
- 5 Factors That Could Put Your Pension at Risk
- How to Handle Awkward Money Situations
- Can I Afford to Quit My Job?
- How to Get the Salary You Want Even in This Economy
- Practical Steps Average People Can Take to Retire Early
- Are American Consumers Relapsing Into Debt Addiction?
- How to Complain to Companies and Get Results
- How to Catch up After a Retirement Savings Break
- Gen Y's $2 Million Retirement Price Tag
- Social Security: On Entitlements and Ponzi Schemes
- Reducing Debt Load Key to Financial Health
- Dipping Into Your Retirement Account to Pay for College
- Why Your Retirement May Not Be Permanent
- The 10 Most Difficult Retirement Decisions
- Retirees Increasingly Depending on Social Security
- Tougher Rules for Credit Bureaus Could Be On the Way
- Tips for Picking an Affordable Place to Retire
- One Move Could Boost Your Retirement Security
- 401(k) Withdrawal Mistakes to Avoid
- 6 Little-Known 401(k) Perks
- What's the Best Way to Save for College?
- How Do You Preserve Purchasing Power in a Tumultuous Economy?
- Steps to Financially Prepare Your Student for College
- How to Avoid Money Envy
- How to Make a Financial Comeback
- What New Inflation Formula Would Mean for Social Security Recipients
- How to Predict Your Social Security Payout
- Is Your Retirement Plan Obsolete?
- How to Strengthen Your Retirement End Game
- How to Avoid Online Shopping Scams
- Dodging the Real Estate Down-Payment Obstacle
- Will This Home Renovation Pay Off?
- Family-friendly Ways to Save Water
- 10 Reasons to Delay Retirement
- Why Celebrities Run Into Money Trouble
- What Are Your Rights When a Debt Collector Calls?
- 5 Crazy Money Ideas That Just Might Work
- Many Grocery Staples Are Getting More Expensive
- Vow Not to be a Financial Mismatch
- How to (Finally!) Agree About Money
- To Save Money Get in the Habit of Bargaining
- How to Cope With Retirement Sticker Shock
- How Can We Make 401(k) Plans More Like Pensions?
- 8 New Retirement Rules
- 6 Ways You Can Save Money by Going Green
- New Online Marketplace for Financial Advisors Stirs Up the Market
- AARP on Social Security: A Game-Changer for Entitlement Programs?
- Online Banking: Is It Safe to Bank Online?
- 10 Things You Should Know About Your IRA
- Author Maps New Phase of Life Between Middle and Old Age
- Don't Wing It with Frequent Flier Programs
- Appealing An Insurer's Denial Is Often A Good Strategy
- Midyear To-Do List: 12 Steps to Getting Your Finances on Track
- Life Insurance After 50
- Is Long-Term Care Insurance Right for You?
- Private Disability Insurance Can Cover You if Your Employer Doesn't
- Careful Planning the Key to Comfortable Retirement
- Should You Count on Social Security in Your Retirement Plan?
- How to Cope With a Forced Retirement
- How to Protect Your Corporate Benefits
- How to Retire on Social Security Alone
- Do You Have Unclaimed Property You Don't Know About?
- Solo 401K Lets Self-Employed Shelter More of Their Income
- 7 Ways to Stay Ahead of Inflation in Retirement
- Why We're More Dependent on Government Support Than Ever
- 7 Biggest Money Mistakes College Graduates Make
- Homeowner Savings Tips: What You Might Not Know
- Why Raising Social Security's Retirement Age Is a Benefit Cut For All
- How to Get Retiree Health Insurance Before 65
- Wills and Estate Planning: Peace of Mind for Your Family
- Put Yourself to the Test: Are You Fiscally Fit?
- 30 Ways to Cut Health Care Costs
- 7 Excuses for Not Saving for Retirement
- What Will Missing Mortgage Payment Do to Your Credit Score?
- Automated Retirement Plans Can Help But Watch for These Pitfalls
- How to Save for Retirement on a Low Income
- What to Do If You Cannot Pay Your Tax Bill
- High Earners Face State Tax Hikes
- 9 Ways to Pay for Retirement
- Is Your Partner a Good Money Match?
- 10 Things You Didn't Know About Social Security
- Don't Forget to Protect Your Retirement Plan From Inflation Risk
- Medical Deductions For 2010: What You Need to Know
- Look Beyond Sticker Price for a Car's True Costs
- HED Reverse Mortgages
- The Magic Numbers of Retirement Planning
- Can I Afford a Baby?
- 6 Ways to Cash In On the New Health-Care Reform Law
- The Least You Need to Know About Retirement
- Tax Changes for Health Insurance Buyers, Home Buyers and the Unemployed
- Small Changes to Get out of Debt and Save Money
- Is Your 401k Riskier Than You Think?
- 10 Places to Go Carless in Retirement
- Deducting Medical Expenses
- Public Support For Government Workers a Case of Pension Envy
- How to Spring Clean Your Personal Finances
- How to Save for Retirement Without a 401k
- What You Really Pay for at the Pump
- Converting Regular IRA to Roth: A Good Idea?
- Retirement Savers Need to Plan for the Critical Draw-Down Phase
- 9 Secrets of Retirement Happiness
- 401k Mistakes Job Hoppers Make
- Why Gen-Y Might Be Too Frugal
- How to Profit from your Hobbies and Interests
- Websites Make it Easy and Even Fun To Reach Savings Goals
- How to Evaluate College Financial Aid Options
- Find This Year's Investing Strategy in Last Year's Tax Return
- Tips for Filing Your 2010 Income Tax Return
- Bad with Money? Blame Your Parents
- The Financial Planner Relationship is a Fragile One
- 7 Reasons Why You Don't Have a Pension
- Tax Mistakes Parents Often Make
- SEC Takes Steps Toward Financial Planning Overhaul, But Issues Remain
- 5 Smart Ways to Save Money for Your Children
- Financial Advisers: Prepare for Big Tax Hikes in 2012
- How to Tweet Your Way to Retirement Goals
- The New 401k Plan: Not Just for Retirement Anymore
- How to Shop Around for the Credit Card That Suits You
- A Better Use for Your Tax Refund
Personal Finance - 5 Factors That Could Put Your Pension at Risk
(c) 2011 U.S. News & World Report