McKinsey in their recent report on The Coming Shakeout in the Defined Benefit Market estimates that 50-75% of all private Defined Benefit assets will be in a frozen or terminated status by 2012. In plain English this means that retirement plans offered by companies will cease or terminate in the next few years. If you are working, the pension plan is likely to cease and your balance will be rolled over into a 401k -- meaning that any future contributions to your retirement plan will come from you, not the company. If you are already retired, it's likely you will get a lump sum payout as the employer will terminate the plan. In other words—you're on your own. Start with the retirement income calculator to determine your needs.
The trend in retirement solutions is that you must fend for yourself. Companies, being for-profit entities are facing the music and closing down their plans because they simply cannot afford them. The US Government can delay facing the music and keep people in denial that the Social Security system will never sustain itself. While people currently age 65 or older will likely not see any changes to their Social Security benefits, they will likely see a dilution in their employer retirement benefits, possibly with a reduction in monthly pension payments or the reduction or elimination of heath care benefits. Those under age 65 should not rely on anyone but themselves for retirement solutions.
Fortunately, there is a lot you can control that determines your comfort in retirement. These retirement solutions include:
Where you live—if you live in a high costs area (e.g. New York, California), move to a lower cost area. You may not like this option, but it could be the keystone to your retirement solution program. Lower housing costs mean more that you add to your retirement nest egg.
Lifestyle choices--opt for savings and not luxuries—vacations, luxury cars, dining out, even driving 75 on the freeway instead of 55 all take money out of your pocket today that could go to retirement savings.
Keep working—you may still retire from your current job at retirement age but consider doing what you enjoy and also making money. You can get a HUGE impact on your retirement solutions by working more years (you get the double benefit of not consuming any of your retirement nest egg and having it continue to grow for each year you continue to work).
Investing better – it's easy to let money sit rather than be properly invested. As you see from the table below, investors expose half of their 401k assets to equities and this should be higher, particularly for those more than 10 years form retirement.
Also, determine how much of your assets you are willing to "annuitize." Some retirees are fixated on leaving and inheritance or a house to their heirs. If they annuitize that asset into an income stream, they can live more comfortably. Annuitization can be accomplished with or without commercial annuities.