Americans who believe they can still join a company or government agency that will provide them with a generous pension plan once they retire are in for a rude awakening, said MFS Investment Management Chairman Robert C. Pozen, who is also a member of President Bush’s Commission to Strengthen Social Security.
In fact, by 2030, Pozen said, Social Security and defined-benefit plans will generate only 24% of retirees’ income, with the rest coming from post-retirement jobs and defined contribution plans.
Pozen made the comments before Strategic Research Institute’s Second Annuity Pension Funds in Crisis Conference.
“Workers have greater responsibility for their own retirements than they have had in past generations,” Pozen said. “However, with prudent planning and investing, retirees can ensure that they have the gold they need to make their golden years secure and comfortable.”
Because people are living well beyond 80, they should limit their annual withdrawals from their retirement savings to no more than 5% a year, Pozen suggested. Currently, many withdraw as much as 10% a year.
He also suggested that retirees keep some money invested in equities; take advantage of health savings accounts or long-term care insurance; and don’t rely on Social Security, as it will reach a benefit crisis by 2017 and could default in 2040.
Pozen also asked businesses to consider offering part-time work to retirees and said the government should consider waiving financial penalties on those who work beyond normal retirement age.