By Andy Rodgers, CFP®, ChFC®
The Boeing Company1 has been a mainstay in Seattle for as long as I can remember. Having grown up just down the street from the main facility and with numerous relatives and clients who have called Boeing home for the duration of their working lives, suffice it to say I know a thing or two when it comes to Boeing and its pension plan.
For years I have advised Boeing employees on how best to utilize their pensions for their retirement but, amidst a global pandemic, the aerospace industry has been hit especially hard and unfortunately that means layoffs1 for companies including Boeing. Retirement planning is normally a process, but Boeing employees are currently being offered ‘voluntary layoff packages,’ which often makes an otherwise difficult decision seem forced, especially for those who are not yet of Social Security age or those who were not intending to retire as little as six months ago.
Being forced to make a lifelong decision about whether or not you should be taking an early retirement package has left many a brilliant engineer pondering over the many ‘what-if’ scenarios that could play out based on one of the varied offers you receive. While every person and pension offer is unique, there are a few elements each person needs to consider.
Understand Your Offer
Boeing doesn’t want to be in the pension business moving forward. It’s why the company is only offering its Volunteer Investment Program (VIP) to new employees versus the The Boeing Company Employee Retirement Plan (BCERP) and why they are offering employees lump sum benefits in their layoff packages. But deciding whether to take a monthly pension payout or a lump sum can be a difficult decision and depends entirely on your personal situation.
Other offers that you may be presented with can include a Social Security catchup provision. Typically, the earliest age one becomes eligible for Social Security retirement income is age 62. If you retire before that, the amount of payout from your pension will be increased, but once you turn 62 and qualify for Social Security retirement income, your payout will decrease. That change in payout can come as a shock to some who didn’t fully understand their offer and have grown accustomed to receiving a certain monthly amount.
Long-term Care
Long-term care policies help pay for assisted living or at-home care expenses and can alleviate the burden of payments on future generations. Traditionally, insurance companies walked away with the money that was put into a long-term care policy once the policy holder passed away. Today, long-term care policies can do so much more. The policies I advise my clients to choose are asset based. Meaning, if you don’t end up needing long-term care in retirement, all the money that was put into it gets passed on to your heirs. It’s one way to build a legacy with a safety net if you need to tap into it in the future.
Make a Plan
When I begin working with a client leading up to retirement, I like to establish a number of factors including mindset – setting goals and your dream for the future; analyzing your net worth and conducting a cash flow analysis; determining risk management; establishing tax management strategies; and identifying investment opportunities. These five factors are incredibly important when building the foundation of a financial plan that sets the course for a strong future in retirement. Whether you’re able to start in the planning phase, or it happens to come after you’ve made the decision to retire, it’s crucial you have these conversations with an advisor. Having a strong financial plan and being able to stick to it ensures a retirement by design rather than by default.
If you are currently staring at a retirement offer and you’re not sure what to do or how to take the next steps, please reach out to schedule a conversation. Having helped dozens of Boeing employees navigate a similar situation, I am here to help and advise on next steps. Just because you didn’t set the timeline doesn’t mean you can’t set the course for the life you’ve always envisioned.
Any opinions are those of Andrew Rodgers, CFP®, ChFC®, and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance does not guarantee future results.
Long Term Care Insurance or Asset Based Long Term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59½, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. Please consult with a licensed financial professional when considering your insurance options.
Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
1 Boeing to Cut Thousands More Employees as Losses Mount (Seattle Times, Oct. 28, 2020)
