401(k) plans can offer more security than Ky. pensions

In the world of Kentucky politics today, it seems like just hinting at switching the public pension system to a 401(k) style plan has become synonymous with sacrifice and financial insecurity.

State and local unions have not been receptive to proposals that would convert Kentucky’s public pension plans to defined contribution plans, and in the case of public pensions, a 401(a) retirement plan.

Change is scary and can be especially difficult when it affects one’s finances. However, as someone who has made the transition, I can assure those who are worried that the switch to a 401(k) retirement plan was one the best things that ever happened to me financially.

I started seriously thinking about my retirement years around my early 40s. I was hired at Logan Aluminum by the Fluor Corp. in October of 1996 as a contractor filling mechanical slots when and where needed. At that time, both Fluor and Logan had defined benefit plans, so I didn’t think I had to worry about my retirement finances at all.

From my perspective, I had my Social Security, my defined pension plan from Fluor and hopefully a Logan defined-pension plan on the horizon, along with a 401(k) with both companies. I appeared to be on track for a financially worry-free retirement at age 62 or younger.

What could possibly go wrong?

Fast forward 10 years to 2006. After working for the Fluor Corp. for over a decade, I finally achieved my goal of being a full-time employee with Logan Aluminum. Unfortunately for me, Logan had decided to terminate its defined benefit pension plan — 43 days prior to my hire date. Soon after this, I also received a letter from Fluor stating that it was freezing its defined benefit plan. My choice was to take a buyout or take the $240 a month for my 10 years of service.

At this point, all I had for retirement was my Social Security, the meager dollars offered by Fluor, and what little I had contributed to my 401(k) plan. At 53 years of age, I was panicked. I was looking at working until I was 67 to 70 in order to max out my Social Security benefits.

That’s when I decided that I would take my finances into my own hands. My only option was to more aggressively fund my Vanguard 401(k) plan, investing only into what I felt were good growth funds. At times this stretched my budget, but this was an emergency. At every opportunity, I would go to the Vanguard website to learn everything I could related to managing my plan.

In 17 years, I went from not worrying about my retirement years, to the prospect of working until I die, to retiring with a high level of financial peace of mind at age 62.

I know firsthand how initially intimidating it can be maneuvering around in unknown financial territory. And as the husband of a retired teacher, I know how hard public servants work. But I know from experience that 401(k)-style plans can work and the plan proposed by Gov. Matt Bevin and leaders in the General Assembly will provide a generous match.

New and recent hires or candidates for buyouts should not allow others to make them think a defined contribution plan is too much of a sacrifice or will not work. They are the opportunity of a lifetime and can be the key to a long, happy retirement.

I ask public-pension support groups not to deny these young people the opportunity to retire wealthy as opposed to going through their careers under a dark cloud of a failing public pension system.

This story was originally published December 8, 2017 at 6:13 PM with the headline "401(k) plans can offer more security than Ky. pensions."