In the interest of the health and well-being of the communities we serve, our branch offices are not meeting in person with new and existing clients at this time. We will continue to serve you through several virtual options. Learn More
You may be counting on your pension or 401(k) to provide a sizable amount of your retirement income. But if your employer changes these plans in some way, what steps should you take?
Let’s consider some possible scenarios about changes to your retirement plan:
When a pension is frozen … If your employer freezes your pension plan, you won’t lose any of your existing benefits, but you won’t earn any new ones. Some freezes are considered “soft,” which means your benefits can grow based on your salary increases, but you won’t get credit for any further years of service.
When a pension terminates … When an employer terminates a pension plan, you’ll likely be offered a lump sum immediately or monthly payments for life, starting when you retire.
When a 401(k) is frozen … A 401(k) freeze typically occurs when two companies merge. During this process, the new company may temporarily halt all new plan contributions and withdrawals, but you still have the same ownership rights you had before the freeze.
When a 401(k) terminates … When a 401(k) or similar plan is terminated, your employer may offer to directly roll over your money to another qualified retirement account (such as an IRA), so the funds can continue to potentially grow tax deferred. You could receive the lump sum directly, but unless you roll it over to an IRA within 60 days, you’ll face taxes and a possible early withdrawal penalty if you’re younger than 59 ½.
What can you do if a change in your retirement plan results in your having less income available when you do retire? Here are a few suggestions:
Experiencing a termination or freeze in a pension or 401(k) can certainly be unsettling – but it doesn’t have to destroy the hopes you had for a comfortable retirement lifestyle. As you can see from the above suggestions, you do have ways to address a projected shortfall. Contact an Edward Jones financial advisor to learn more about these and other possibilities.