Financial & Estate Planning

Paychecks that Keep on Going

Paychecks that Keep on Going

A frequent topic of conversation at meetings of the Linscomb & Williams Investment Committee: The change we have seen during our 45 years in how clients plan for the transition in giving up a regular paycheck at retirement. The biggest change?  Today, very few people can count on a company pension to help replace their paycheck when they retire.

Data from the Pension Benefit Guaranty Corp (PBGC) confirms this. When we founded L&W in 1971, these were the statistics for private sector workers:

  • 4 workers out of 10 started their retirement entitled to a monthly pension from their company. This was an attractive addition to their Social Security income.
  • Hardly anyone had a 401k-type account. As late as 1980, less than 1 in 10 workers had a 401k account.

Today, only 1 worker in 7 has a pension from their company when they retire. 401k-type plans or other Defined Contribution plans, such as 403(b)s, are clearly predominant, covering 1 of every 2 workers in the private sector. Retirement cash flow planning for today’s retirees is clearly different. They are not living their parent’s retirement.

What today’s retirees need is a retirement “paycheck.” Imagine having a predictable cash flow throughout retirement to supplement Social Security. And imagine a retirement paycheck that, like your working-years paycheck, could keep pace with or even out-pace inflation. That starts to paint a retirement picture with much more security and peace of mind. Is it realistic to create a retirement “paycheck” like this?

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