Retirement questions surface after pension plan announced

Retirement questions surface after pension plan announced
Dianne Williams (Source: WAVE 3 News)
Dianne Williams (Source: WAVE 3 News)

LOUISVILLE, KY (WAVE) - Retirement experts are breaking down the pros and cons of retirement plans after possible changes to the Kentucky pension plan were announced Wednesday.

Dianne Williams has been navigating the world of retirement for years with her business Retirement Pathways.

She said Kentucky, like most of the country, has been facing a serious pension crisis without any plan for resolution - until now.

On Wednesday, Governor Matt Bevin announced the "Keeping the Promise" plan to work toward fixing the pension crisis.

"It should have been addressed a long time ago," Williams said. "Now we're in a much more serious position so something has to be done. From what I read it seems reasonable. It's at least a step in the right direction. It doesn't mean it's going to be fun."

New teachers and non-hazardous employees will likely be switching from a defined benefits plan to a defined contributions plan. While unions have been critical of this move, Williams says there are perks to both plans.

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The defined benefits plan is a set amount of money from a lump sum that employees get per month.

"The employee knows at a certain age when they retire they're going to get guaranteed stream of payments, for the rest of their life," Williams explained.

When it comes to a defined benefits plan, the government bears all the risk of the market which makes this retirement option more secure for the employee.

As for a defined contributions plan, there's more risk for the employee, but more options too, according to Williams. It's the structure used by corporate America, and one that's helped their bottom line.

"In the scenario with the defined contribution plan, the investor bears the risk," Williams said. "With risk though also means there's opportunity, depending on what happens in the market, that the account value could go up depending on how much they put in."

Williams said employees impacted shouldn't stress about the changes but find ways to plan and be in control of their investments.

"Don't know it will all play out but hopefully it will be very positive for all of Kentucky and for all of Kentucky's employees," Williams said.

Williams has three pieces of retirement advice:

  1. Save Money
  2. Learn about asset allocation, a key factor in generating portfolio returns
  3. Limit your spending: Learn to live BELOW your means today so you free up more money for your retirement (so you have more choices during retirement)

She also offers seminars to teach people how to understand their investments. For more information, click or tap here.

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