Linda’s Story: Involuntary Retirement Part I

Linda was a good friend of mine. I met her shortly after moving to the Boston area in 2004, and we hit it off. It happens sometimes like that… You just meet someone and you can tell there is a friendship waiting to grow. Linda was always quick to help me out, didn’t mind a last minute meal invitation, listened to my complaints, and she was the best cat sitter ever. Once when a family member was critically ill with cancer, she took care of my beloved pet for three weeks out of 5 when I was away. She drove over to my place twice a day to feed her, talked to her, and gave her some attention. I was so secure in my knowledge that Linda had me covered, that I didn’t worry about my 14 year old pet. How often in life do you end up with such a good friend? Fortunately for me, Linda wasn’t the only invaluable friend I had during this period in my life, but she certainly was a blessing and huge help. A few months after Linda’s cat-care kindness, she began telling me about trouble going on where she worked. She was beginning to realize that her job was not secure. She worked as a lab manager, and sure enough within a few months, she found herself forced out. Linda had been with the company long enough to collect a modest pension, but she was in her early 60s, and not in a financial position to retire. Truthfully, she hadn’t even thought of retiring. Like many people, Linda had done very little toward planning for her future. She was a single woman living south of Boston, so the majority of what she made went right back out in living expenses. At this point if I truly known the extent of Linda’s economic situation, I might have advised her differently; however, we don’t often know much about our friend’s finances. Linda looked for a new job, collected unemployment, and began to look at how she was going to survive once her unemployment benefits ran out. For the first time she started to look toward retirement and explore her pension and Social Security benefits. I knew she’d been with her most recent employer for about 12 years, and I knew a couple of the employers she’d had when she was younger. I started asking questions about the length of time she’d worked for former employers and if she recalled participating in a pension plan. Linda thought she may have had a pension at a couple of them, but she didn’t know the type of pension benefit or anything about their value. She did know she’d never cashed out a pension plan, which was good news. Many people cash out their pension benefits from a 401K when they leave a job, so this money doesn’t gain interest over time. As it became clear that she wasn’t going to find another job, Linda truly had to start asking herself if she could get buy on her pension and Social Security benefits as soon as she was eligible. She contacted one former employer and realized she had a pension in a define benefit pension, but she wasn’t getting anywhere with a third employer. I referred Linda to the Pension Action Center. I knew they helped people track down pensions from companies that had gone out of business or changed hands. Linda felt she needed a bit more information about her rights and the questions she should ask. Sure enough, with information she gained through a call to the Pension Action Center, she learned she had a third pension. It was a very small benefit in a 401K, define contribution plan, but in her case, anything would be helpful. She was able to retire with her benefits and with the help of doing odd jobs and cutting back on expenses. I recall marveling at this situation. Here was a woman who did nothing actively to plan for her retirement, but because of the time period when she’d worked and other decisions she’d made without considering retirement savings, she had enough pension coverage to supplement her Social Security income. If she collected her Social Security retirement benefit as soon as she was eligible, her monthly check would be lower than if she waited until she was 66; however, without a job, she couldn’t get by without Social Security. Employers use to offer more defined benefit pension plans, that provided people with better income security in retirement than today’s 401K pension plans. And because Linda had entered a relatively male-dominated field, she had pension coverage. Men are more likely to have pension coverage than women in large part because of the types of work men and women have traditionally done and because men have been less likely to take time away from paid employment to care for children and other relatives. Linda would have likely had more retirement income had she planned, but she said that financial stuff hadn’t ever interested her. Plus, most of her immediate relatives had died young, so she didn’t ever think she’d live long enough to truly retire. She had no way of knowing that she would lose a job at 61 and be unable to find another position. To learn about The Pension Action Center go to http://www.umb.edu/pensionaction/