How should I save for retirement without pension?


Q: How is the best way to save for retire­ment when you can no longer depend on pen­sions and you antic­i­pate being at var­i­ous jobs for 4–5 years at most?

–John, Nebraska

A: John, that’s a chal­lenge that more and more Amer­i­cans face. Com­bine the fact that the num­ber of com­pa­nies that offer pen­sions has shrunk dra­mat­i­cally over the past cou­ple of decades with the increased fre­quency of job changes and the bur­den of sav­ing for retire­ment has clearly shifted to the individual.

That’s even the case for mil­i­tary fam­i­lies. First, the chang­ing land­scape of mil­i­tary retire­ment will make sav­ing in retire­ment accounts like the TSP more impor­tant. Sec­ond, mil­i­tary spouses that work out­side the home have always been faced with the chal­lenge of pick­ing up and mov­ing to a new loca­tion and—if they aren’t run­ning their own business—new employer every few years.

So, what do you do? In my mind, you focus on mak­ing the most of the avail­able sav­ings vehi­cles that are out there.  That cer­tainly includes employer plans like a 401(k), the TSP or a 403(b) as well as retire­ment vehi­cles you can set up your­self, like an IRA or Roth IRA.  And there’s noth­ing that says you can’t ear­mark money you’ve set aside in a bro­ker­age or mutual fund account that’s not in a for­mal retire­ment plan or IRA for retirement.

Also, when you are plan­ning for shorter stints with an employer, you want to be very cog­nizant of impor­tant time­lines and dead­lines. For exam­ple, your employer may offer match­ing con­tri­bu­tions to a 401(k) that vest (become yours) at a cer­tain point.  To the extent you can, you want to remain with that employer long enough for that to hap­pen.  A few extra months can make a big difference!

The other thing that I see hap­pen too often in sit­u­a­tions like you describe is peo­ple cash­ing out their retire­ment sav­ings as they move from job to job.  They may look at what they’ve accu­mu­lated as a way (an expen­sive way given taxes and penal­ties!) to bridge the gap to their next job.  You can see how this move, espe­cially when it’s repeated over the years, can erode your retire­ment nest egg. Instead this money should be left in the for­mer employer’s plan, rolled over to an IRA, or rolled over to the new employer’s plan. The “right” choice is a dif­fer­ent dis­cus­sion, but any of those three moves keeps the money in place for retirement.

So, in a nut­shell it’s about sav­ing for retire­ment now and into the future and pre­serv­ing and build­ing upon what you save at each stop on the road to retire­ment. Good luck!



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Scott Halliwell and JJ Montanaro are CERTIFIED FINANCIAL PLANNER™ practitioners with USAA Financial Planning Services, one of the USAA family of companies. Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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