{"id":48910,"date":"2024-03-05T16:36:50","date_gmt":"2024-03-05T16:36:50","guid":{"rendered":"https:\/\/bulmanwealth.com\/?p=48910"},"modified":"2024-04-12T16:57:33","modified_gmt":"2024-04-12T16:57:33","slug":"the-great-pension-shift-from-guaranteed-gold-watches-to-diy-retirement","status":"publish","type":"post","link":"https:\/\/bulmanwealth.com\/the-great-pension-shift-from-guaranteed-gold-watches-to-diy-retirement\/","title":{"rendered":"The Great Pension Shift: From Guaranteed Gold Watches to DIY Retirement"},"content":{"rendered":"

Remember your grandparents boasting about their “golden parachute” \u2013 the generous company pension plan waiting for them at retirement? Today, that picture is fading fast. The remaining recipients are government workers. Corporate America has shifted gears, leaving many wondering: where’s the safety net in this new retirement paradigm?<\/span><\/p>\n

It’s not just you feeling the impact of the change. Companies like General Electric and IBM freezing their pension plans are stark reminders of a nationwide trend that includes even the biggest corporations. The traditional, defined-benefit pension plan, where the net worth of your employer guarantees a set monthly income after retirement, is nearly extinct.<\/span><\/p>\n

But why the switch?\u00a0<\/span><\/p>\n

In our blog, we\u2019ll look at some of the factors that caused this shift and how you can use the services of a <\/span>Roseville retirement planning team<\/a><\/strong> to plan accordingly for the type of retirement you\u2019ve envisioned for you and your spouse.<\/span><\/p>\n

Economic Pressures: The Squeeze is On<\/b><\/h2>\n

In the early 1980s, many companies began moving away from pension plans, also known as defined benefit plans, and shifting to defined contribution plans, also known as 401(k) plans.\u00a0<\/span><\/p>\n

This shift was mainly due to the Revenue Act of 1978, which included a provision that became Internal Revenue Code (IRC) Sec. 401(k), which was effective on January 1, 1980. The provision allowed employees to avoid being taxed on deferred compensation if the benefits complied with specific requirements.\u00a0<\/span><\/p>\n

The first 401(k) plans were established in 1981. This change was attractive for companies because 401(k) plans shifted the responsibility for retirement savings from the employer to the employee, reducing their financial burden and the risks associated with company-paid benefits for life.<\/span><\/p>\n

\u00a0<\/span>Following are some of the driving factors that caused companies to move away from pension plans into 401(k) plans:\u00a0<\/span><\/p>\n