Retirement Shock: Need to Find a Job After 40 Years at General Electric

https://www.wsj.com/articles/retirement-shock-need-to-find-a-job-after-a-40-years-at-general-electric-1524418855

by thisisit • 8 years ago

88 135 8 years ago

wsj.com

codemac• 8 years ago

Remember to set up auto-sale folks.

Your retirement returns will be less than selling at a lifetime high price of whoever you work for.

But you will not sell at the lifetime high price. Please don't forget to sell at all.

madengr4• 8 years ago

It took a lawsuit for my employer (Honeywell) to allow moving (out of Honeywell stock) of matched contributions. I still keep about 20% in company stock. It has done very well and pays a good dividend. To think that we were almost bought by GE years ago.

froindt• 8 years ago

I still keep about 20% in company stock. It has done very well and pays a good dividend. To think that we were almost bought by GE years ago.

I'm curious why you keep so much in Honeywell stock? For a very long time GE was a great company to have that would routinely give nice returns and dividends, and then things went downhill. Layoffs happened, and those people were faced with much lower portfolio valuations if they were heavily weighted in the company they work for.

pg_bot• 8 years ago

If you are a rank and file employee, I would suggest divesting entirely from your company's stock. From a risk perspective it's extremely dangerous as you are already dependent on your employer for your source of income. In the case that they do poorly you have the potential to lose both your income and your savings. Unless you have the ability to seriously affect the stock price, you are putting too many eggs into a single basket.

ghaff2• 8 years ago

Or, at a minimum, at least don't get too greedy. I got (somewhat) lucky with the dot-com crash. My prior employer's stock (which I had been accumulating over a decade from a previous employer who got purchased) lost about 95% of its value. Fortunately, I had sold some and the stock did end up recovering a bit.

madengr4• 8 years ago

Got a non paywall link?

monocasa• 8 years ago

http://archive.is/RgZJi

aerotwelve• 8 years ago

This is cool, thanks for sharing this site (archive.is).

Does this work because your browser was logged into a paid WSJ account before you used archive.is to log the page? Or is it only because WSJ's paywall allows archiving sites to read full articles as a matter of policy?

Just curious to know how reliable this solution might be for other sites.

edem• 8 years ago

Search for the title on google.

phamjamstudio• 8 years ago

Open the "web" url in incognito, then click on the WSJ link from the search results

znpy• 8 years ago

The article is behind a paywall.

cgy1• 8 years ago

Seems like an $85k/yr pension should be more than enough to retire on.

hinkley• 8 years ago

    Roughly $140 billion in GE stock-market wealth was lost in the past year

GE has lost a substantial percent of its market cap this year. I wouldn't count on that pension sticking around for 30 years without being 'restructured'.

And in 30 years it'll be worth $40k a year anyway.

esturk• 8 years ago

I know it was only 1 guy, and an extreme example at that, but he is 61. Getting 30 years is great. Most men won't get to 91. He can also consider early retirement at 62.

tspike• 8 years ago

No kidding, at a 4% safe withdrawal rate, that's the same as a $2+ million nest egg.

That said, I think he's concerned that, given GE's trajectory, the pension will evaporate. What then?

gascan3• 8 years ago

It's already only about 70% funded, per the article.

francisofascii• 8 years ago

He might look into buying pension insurance.

nugget• 8 years ago

This is all smoke and no fire. The article's subject complains about his account value falling from $280k to $110k in value, meanwhile his pension has a net present value in the millions. I'm surprised this made it by the WSJ editors.

youpassbutter• 8 years ago

I'm surprised this made it by the WSJ editors.

Why does that surprise you? Obviously the misleading and clickbaity headline will be chosen over the honest headline.

solotronics2• 8 years ago

making the assumption the pension sticks around through the next recession..

look at those who had a GM pension...

hnaccy• 8 years ago

Don't bet it all on one horse if you can help it.

this_user• 8 years ago

This looks like a failure with portfolio construction to me. Keeping a lot of your net worth in the stock of one company is not a very good strategy for diversification. This is especially true when it is the stock of the company that you are working for, because if the company gets into trouble, you might not just lose your job, but also your savings.

One easy improvement your this particular case would have been to roll some of the money from GE stocks into bonds and do a classic 60:40 split. If he really wanted to stick with that company, he could have even bought GE bonds since their default risk is reasonably low.

herodotus• 8 years ago

I have to agree with you. I always took a very conservative approach and divested my company shares in order to diversify, even before I retired. In my case, the pain came not from stock losses, but from their gains. I "lost" so much by selling shares too soon. But now I am diversified and can survive a loss of my holding in my (former) companies shares (I still own some).

ISL• 8 years ago

Decisions can only be judged in the context within which they were made.

Diversifying is a wise move for strongly mitigating downside risk.

One of the wisest and thoughtful people I know was a long-time and early employee at a major tech company. That friend did exactly the same thing, diversifying early. It is difficult to overstate how successful he has become in life; success need not be measured in dollars.

z3t42• 8 years ago

The whole reason stocks where invented was so that you could spread the risk. Instead of owning 100% in one ship, you owned stock in many ships, so if one ship sank you didn't loose it all.

thoth• 8 years ago

Huh? Stocks (shares) were invented to raise capital for businesses.

baldfat2• 8 years ago

I blame Corporations getting rid of Retirement Plans for the sake of profit.

My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) NYC Handy man (25 years)

My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician Union 10+ years.

They both were able to live a decent life after retirement and didn't work a single day afterwards. This will not happen for me. I also have a privatized plan for 15 years but my son had cancer for 5 years (Drained my retirement early) and we had 5 kids and chose to have my wife stay at home for about 7 years. Not very easy to save, heck I have no debit outside of mortgage and some student loans still. Zero credit card debit and no car payment. I know I am ahead of the curve but what about everyone else up to their necks in debit?

The system is broken and most people don't save enough and a few can't. https://www.bloomberg.com/view/articles/2017-01-03/the-401-k...

pc863• 8 years ago

Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).

wlesieutre• 8 years ago

Were those retirement plans fully funded over their years of employment, or were they kicking the can down the road with "We'll make big retirement promises and in 30 years when the $XXX,XXX,XXX bill comes due it'll be someone else's problem"?

icebraining• 8 years ago

It's not clear it would help you; a company could move part of your salary to a pension, but then your current life would be even more difficult.

Essentially what you're saying is that you'd like to get a raise (more pension without a loss of salary). Well, wouldn't we all!

Now for people who spend frivolously, forced savings might be helpful, but it's not clear to me why the companies should take that role; seems like a role for the State (and, in fact, that seems to be the rule in many countries, with mandatory pension plans).

notyourday• 8 years ago

It is about choices. Having 5 kids was a choice.

presidentender5• 8 years ago

we had 5 kids and chose to have my wife stay at home for about 7 years

You and your wife chose to have five children, and chose for her to work as a childcare provider, which we know is a low-paid gig.

I'm very impressed that you managed to do that without going into debt, but I have little sympathy for other people who in similar situations find themselves struggling: the rest of us derive a smaller benefit from the continuation of your genetic legacy than you do, so it is appropriate that society should pay a smaller part of the cost of that lifestyle choice.

People who fall into similar situations without your foresight might struggle more, but so too do people who buy expensive cars they can't afford or pursue careers they enjoy instead of careers that pay well.

astura5• 8 years ago

First off, you're mistaken. In general, baring disability, you don't collect a military retirement for under 20 years of service. You do get a TSP, but that's contributions made by the sailor, the Navy doesn't contribute to that.[1][2] Sounds like either your grandpa got military disability benefits, you misunderstood what a TSP was, or he might have even been lying to you.[3]

You choose to drain your retirement early, if you didn't have that option (in other words, your employer controlled your retirement instead of you) you wouldn't magically get extra money to pay for cancer treatments - your retirement portion of your salary would just be unavailable for you to use. Just because you didn't use your retirement account for its intended purpose, that doesn't mean that defined contribution retirement plans are "broken."

In general, its probably not a great idea to drain retirement accounts to pay for bills, as they have some protection from creditors... at least talk with a bankruptcy attorney beforehand. I would personally rather declare bankruptcy than drain my retirement accounts.

It might just be me but I'd prefer controlling my money over my employer doing so, my employer might not even be around in five years. You can't prevent your employer from "investing" your retirement fund into Bernie Madoff's pyramid scheme[4], but you can prevent yourself from doing that. In the past I've worked at places where I don't trust upper management to make the right financial decisions. I'm glad I have a 401(k) because I can collect significant tax benefits from maxing it out.

Your wife obviously isn't going to get a retirement saying home with the kids with or without employee controlled pension, so I don't understand what that complaint is about? Or how it relates to retirement accounts.

In my opinion, if your employer offers a 401(k) they should be legally required to a) be opt out rather than opt in and b) be legally required to contribute some amount. That would fix some issues with people not prioritizing saving for retirement, however, unless you make draining your retirement account illegal then you aren't going to prevent people from doing dumb stuff.[5]

[1] They have actually changed that recently, a few years ago they introduced a new defined TSP contribution option that you may opt into instead of the defined benefit option.

[2] Some exceptions apply for war vets living in poverty

[3] I'm so sorry to bring up that possibility, I don't want to be mean, but its a fact that most people who claim to be in the special forces are lying, its a common thing.

[4] The NY Mets lost a bunch of money in Bernie Madoff's pyramid scheme.

[5] Dumb stuff being the guy I know who cashed out his retirement account to buy furniture.

dominotw• 8 years ago

I have question regarding 'retirement plans' if you don't work for govt.

1. Do your retirement plans transfer between companies.

2. What happens to your retirement plan if the company goes down under.

ptero• 8 years ago

Retirement plans at the time of your grandfathers started in a good state: low unfunded liabilities, high population growth and lower life expectancy after retirement than today. Thus such plans were generous.

In fact, they now seem way too generous: paying such obligations accumulated large unfunded financial liabilities (6 trillion is an estimate I saw a few times), which shows them as unsustainable. This means that the pensions of your grandfathers paid a lot of money of your children, so their parents (us) struggle to fix this.

The solution is not more of the same defined benefit schemes to stick our children with still bigger bills. We must do something else (defined contribution? variable benefit?)

rconti• 8 years ago

"for the sake of profit" [citation needed]

Maybe it was for the sake of actually being a going concern? I see no proof that this was ever sustainable (nor do I see proof that it absolutely wasn't, I'm just saying, what are the numbers involved?)

Was the model ever solvent? Or did your grandfathers benefit from the money being pumped into the system during their successors' years, successors who would never have that same benefit?

That said, the idea that you "don't have a choice" in saving for retirement (that is to say, perhaps a pension program that's less generous) has something going for it. There's a reason NFL players go bankrupt. None of us are particularly good at intuitively understanding future needs and planning for the future.

gaius3• 8 years ago

This looks like a failure with portfolio construction to me

I’m sure that’s a very useful piece of advice for a Worker for whom “construction” means, you know, actually making stuff, not financial trickery

overcast• 8 years ago

I've always sold my company stocks soon as they were received. Then reinvested those funds in in either Vanguard index funds, or paying off school loans. Makes zero sense to tie up your entire income to one company. Your weekly paycheck, AND stocks are totally reliant on the same company performance.

mirceal2• 8 years ago

this may be an unpopular opinion (especially if the stock is doing well) but I've also done the exact same thing (sell on vest + diversify).

solotronics2• 8 years ago

if you think your company will outperform in the short term you could set up a stop loss limit to allow only a certain percentage of loss in your company stock that way you are only exposed to upside

himom• 8 years ago

It’s a conservative play but an understandable one for older employees: it’s usually too risky to both work at a company and hold its stock.

Diversify also means more than stocks and bonds... land, art, apartment buildings, laundromats, etc.

https://www.betterment.com/resources/should-i-own-stock-in-t...

indemnity• 8 years ago

Same. It’s the reason I own a house now (cash for 30% down payment in overheated market), and retirement savings are also pretty healthy due to cashing out company stock as soon as it vests.

Also means I can walk any time I want, most I’d lose out on was next year’s RSUs.

zokier• 8 years ago

this may be an unpopular opinion

In what universe it is an unpopular opinion? I've always only heard the recommendation to diversify

pm902• 8 years ago

Quote from the article:

“Employees need to think very carefully about investing their own money beyond 10% in company stock,” said Corey Rosen, founder of the National Center for Employee Ownership, a nonprofit that works with companies. “If you are looking at retirement, then diversification is a good thing.”

The whole article seems to be "People trusted GE stock way too much; it went down and they lost massively". This is another reason to be informed and proactive about the basics of finances and where your money really is. Perhaps I sound too harsh, but I simply fail to understand how all these people thought that holding 6 figure amounts in a single stock was a good idea? I just do not get it... wouldn't any financial planner have recommended diversification?

Someone1234• 8 years ago

Perhaps I sound too harsh, but I simply fail to understand how all these people thought that holding 6 figure amounts in a single stock was a good idea?

Indeed. But yet people in this thread are advising moving it all to just a single index fund.

While index funds are somewhat diversified many suffer from over-investment into specific industries like tech. If the .COM bubble burst again tomorrow several of the most popular index funds with be hit hard...

For example, look at the popular Vanguard Total Stock Market Index Fund, 20% in Technology, and 20% in financial, but if you dig into the financial portfolio you'd realize that a pop in tech would also sink many of the investment companies in financial too.

I guess what I am saying is, an index fund is better than a single company holding, but it isn't a broadly diversified portfolio. If you want a diversified portfolio it will cost you, since many of the alternatives don't perform as well (e.g. international index funds, small-cap, etc).

astura5• 8 years ago

That's why people close to retirement or who are in retirement need to change their asset allocation. Nobody is suggesting a retiree should hold 100% equities.

gascan3• 8 years ago

It's worth remembering that once upon a time, at least, there was no such thing as index investing or even low cost investing. Trades & brokers were expensive, and shares were frequently literally pieces of paper. My father still has paper shares from that age. They live in a bank vault. Buying stock directly from your employer skipped the broker & Wall Street.

We all know picking stocks is perilous- but what do you if it's 1970, six years before VFINX was even created? You pick your own stocks, hire a broker, or buy expensive mutual funds. Don't feel like a good stock picker? The safe play, of course, is to buy big reputable companies with a long history of stable stock- see, GE.

Anyway, I just wanted to point out it was something of a different world back then. I think it wasn't even that long ago that you typically still had to buy whole shares of things. Which, as I'm sure you can imagine, is a big part of why DRIP is another recent phenomenon.

pm902• 8 years ago

That's a great point and thanks for making it. Totally forgot that index funds and electronic trading are very recent phenomena.

virtuexru• 8 years ago

He left GE with an annual pension of $85,000 and company stock valued at more than $280,000.
Retirement looked pretty good until GE shares collapsed. His shares are now worth about $110,000, prompting a late-life job hunt.

I don't understand; it says he has an $85,000 pension. Isn't that more than enough to retire on? His stocks collapsed to about half their worth (roughly $110,000). This isn't exactly a crazy one off scenario; if you are invested in a single company and do not diversify, it's hard to place the blame on "others" and "complain" about having to find another job after keeping an almost six figure pension at the same time.

Is there a chance that GE could forfeit on their pension payout requirements if they lose more capital? Not sure how that works so forgive my ignorance.

logfromblammo4• 8 years ago

The pension is 70% funded, so he can only count on $59500/year actually being there. The likely scenario would be that all pensioners take the same percentage of haircut as the pension obligation is transferred to another company.

If he cashed out of GE and went into index funds, the stock portfolio would be conservatively worth another $3300 a year.

That's still $62800/year. If he owns his home, that amount can fund his retirement, until his first major medical expense.

gvb• 8 years ago

US pensions are a guaranteed benefit, insured by the US government. If GE defaults on the pension, the US government says they will step in as trustee and will pay him the full $85,000/year.

Ref: https://www.pbgc.gov/

ztoben• 8 years ago

In the article it says he's still paying a mortgage and his wife is disabled. So I would imagine there are quite a few medical expenses on top of that.

gaius3• 8 years ago

100% of the blame lies with Jack Welch and his short-term thinking, reckless cuts that hollowed out the company, well now those bills are due.

Did you know his own retirement package included lifetime usage of the corporate jets?

beastman82• 8 years ago

So Jeff Immelt and his 16 year reign is 0%? C'mon.

gaius3• 8 years ago

Welch was responsible for the culture change at GE, so yes. Immelt just continued what his master started

dangerboysteve• 8 years ago

Frontline did a nice story on this

https://www.pbs.org/wgbh/frontline/film/retirement-gamble/

joshuaheard• 8 years ago

Enron should have taught people not to keep all their investments in employer stock. My question about this article is he has an $85,000 annual pension with $280k in stock that sank to $110k in value. At 4%, the $280k would return an additional $11,200 per year. That would be reduced to $4,400, a drop of less than 10% of his annual income. For this he has to find a job?

dv_dt• 8 years ago

Pensions end up tied to the health of the company too. Though they have some protection in law, in practice there is still significant risk with company pensions. There are cases when pensions promised healthcare but cut back later:

"GE revised its GE Medicare Benefit Plans handbook in 2012, underscoring the right to 'terminate, amend or replace the programs or plans, in whole or in part (subject to applicable contractual requirements), at any time and for any reason,' according to records in a 2014 lawsuit by two former GE employees, alleging that GE violated an implied obligation to provide continued health-care coverage. The clause existed in all previous versions of the handbook as well, GE said."

http://www.thefiscaltimes.com/2015/08/04/GE-Saved-Billions-C...

All the more reason to diversify retirement funds which one has that option.

brandonmenc• 8 years ago

Speaking from experience (father worked at GE for roughly the same time as this guy and is around his age), anyone who worked at GE for 40 years - even the lowliest hourly employee - should have a massive pension and/or retirement plan - and company health insurance to boot.

He didn't diversify. He definitely could have afforded to pay a money manager on a GE salary.

At least he has that fat $85k/yr pension!

nunez• 8 years ago

A lot of folks got screwed this way. Being a company lifer is risky.

Retirement Shock: Need to Find a Job After 40 Years at General Electric

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