As companies rush to shore up pensions or cancel underfunded plans, you need to protect yourself from common pension mistakes. The Pension Protection Act of 2006 requires pensions be fully funded by 2015. It also prevents companies with big pension deficits from skipping annual contributions and still pronouncing their plans healthy.
One problem not addressed by the act that continues to affect millions of people of all ages, not just retirees, is pension miscalculations. Anytime you change jobs or take a lump-sum pension cash-out, you are at risk. Women are especially vulnerable to pension mistakes because they tend to move in and out of the workforce more often than men. For the most part, pension mix-ups aren’t intentional.
How would you know if there was an error which had been compounding for many years? How can you ensure that you’ll get what’s rightfully yours when retirement arrives? It’s up to you to keep track of your own pension.
A good place to start is to educate yourself about how your plan works. Contact your company’s benefits officer and ask for a summary plan description. This will show how your pension is calculated. Request a personal statement of benefits which will tell you what your benefits are currently worth and how many years you’ve been in the plan. It may even include a projection of your monthly check.
Finally, you should create a “pension file” where you keep all your documents from your employer. Also keep records of the dates you worked and your salary since this type of data is used by your employer to calculate the value of your pension. Ask for professional help if you still think something might be wrong. The American Academy of Actuaries Pension Assistance List program offers up to four hours of free help from a volunteer. The federal administration on Aging’s Pension Counseling and Information Program may also be helpful.