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Plan Today for Retirement Tomorrow
By David Chazin
Planning and saving for retirement, like cleaning out the attic, may be something you figure you'll get to later. If you're like most Chevron employees, you're happy to simply contribute to your ESIP and let both that and your CRP grow without giving it a second thought. But when "later" arrives at retirement age, you may not have the financial resources to enjoy your golden years.
Long gone are the days when you could expect the traditional sources of retirement income -- Social Security and a rock solid company pension plan -- to carry you through retirement. This is the result of several factors: inflation, longer life expectancies, cutbacks of medical and pension benefits, rising age requirements for full social security benefits, and overall economic uncertainty, among other factors.
By taking an early and active role in planning for your retirement years, however, you can stay ahead of the game. Your savings could come under increased pressure in future years to make up for the shortfall caused by corporate and government retirement benefit cutbacks, so the sooner you start saving, the better. Fortunately, Chevron assists you by putting money into your ESIP each paycheck, and offering one of the best 401(k) matches available to anybody.
Setting specific goals is the first step in planning for your retirement. That means figuring out when you want to retire and what kind of lifestyle you want to have. A popular rule of thumb is if you earn $100,000 or more annually prior to retirement, you will need roughly 70 percent of that amount ($70,000) annually to maintain your standard of living after retiring. Your financial needs could be greater or smaller, depending upon your individual circumstances, so to determine the exact number you should talk to a financial planner.
Here's a closer look at the compelling forces, which are causing more Chevron employees today to recognize the importance of personal savings for retirement:
In response to soaring retiree health care costs, many cost-conscious employers are reducing health coverage for their retired workers. Companies are making retirees pay a greater share of the premium, tightening eligibility requirements (for example, when Chevron switched from requiring 75 points to 90 points), and requiring higher deductibles. Many companies are eliminating retiree benefits altogether, so you're lucky to be Chevron
Employer-sponsored pension plans are an important source of retirement income for many Baby Boomers. But recent changes may ultimately mean a decline in the standard of living for tomorrow's elderly, even with Chevron's CRP. One reason most Chevron retirees opt for the lump sum cashout of the CRP is that it lacks a cost-of-living-adjustment, which means your standard of living would decrease every year if that were your sole source of retirement income.
A tidal wave of Baby Boomers has already begun straining the Social Security system when they started retiring in 2006. Once considered politically untouchable, the system's walls started cracking in the 1980s when benefits for couples earning over $32,000 were partially taxed for the first time. Higher Social Security taxes or reduced benefits remain a possibility in the future. So don't rely too heavily on Social Security to bankroll your retirement.
Inflation and family needs also can impact your retirement plans. Although the rate of inflation has been relatively low in recent years, the long-term effects of even a low inflation rate can eat away at your investment returns.
Chevron went through a massive reorganization in 2010. There's no guarantee that another economic collapse won't happen in the future, and with it, the loss of a job you may be counting in for both immediate income and your retirement.
There are also expenses that many Chevron employees don't account for. Saving for your children's college education bills is typically planned, but caring for your elderly parents may not be and can quickly erode your savings. Plus, you never know what other emergencies might happen that require you to draw down your savings.
There's no need to panic, but you should start planning for your retirement now. More than ever, it's up to you how large a nest egg you'll have at retirement.
I'd be happy to arrange a meeting with you to discuss your current financial strategy and help you start planning today for retirement in the future. Because I work with many Chevron executives, managers, employees and retirees, I'm very knowledgeable about your various compensation plans and benefit offerings, plus other issues specific to Chevron employees (in addition to the retirement, investment, and estate planning issues everybody faces). Please contact me at (925) 659-0251 with specific questions or to schedule a time to meet.
David Chazin, Insight Wealth Strategies and Lincoln Financial Advisors Corp are not affiliated with Chevron.