During our 30+ years helping retirees, the majority have been very excited to start the planning process. However, some have been surprised to find out our recommendations differ from what they have heard elsewhere.
This is because there’s a lot of misinformation swirling around. As a fiduciary, we are legally obligated to serve your best interests at all times. So, we can tell you achieving the retirement you desire is not going to happen if you’re sidetracked by myths and false information.
That's why we aim to debunk the top six retirement myths that Southern California Edison employees may have heard. Our goal is to help you start building the retirement of your dreams today.
Myth #1: If I receive a pension, I do not have to make any decisions regarding my pension.
If Southern California Edison offers you a defined-benefit plan, your pension is primarily the responsibility of the company. However, that doesn’t mean you just wait for a check in the mail once you retire. You have major decisions to make.
If offered a pension, employees can potentially elect to receive a monthly payout like a traditional pension or they could convert their pension into a one-time lump-sum benefit, which can be subsequently rolled over into an Individual Retirement Account (IRA) and then controlled by the retiree.
So, monthly or lump-sum pension?
Each payout has its own set of pros and cons. Deciding which option is most appropriate for you involves many factors. Deciding which option is most appropriate for you involves many factors. It is best done with the help of a professional, who can incorporate all aspects of your financial life – Social Security, 401(k), real estate, and inheritance into your decision.
Further, married Southern California Edison employees may have survivor benefit options to consider. At retirement, it is possible that you have multiple survivor options to choose from for the monthly pension, but these are only available for a qualified spouse.
Myth #2: If I receive a pension from Southern California Edison , Social Security becomes less important.
Social Security will likely be one of your primary sources of retirement income. And just like your pension, you should carefully consider how best to use it based on your personal needs.
The size of your Social Security benefit is greatly determined by your age when you claim. You can receive your full Social Security retirement benefit upon reaching your Full Retirement Age, which is age 66 or 67, depending on your date of birth. But you can claim a permanently reduced benefit as early as age 62. Delaying Social Security until age 70 entitles you to a higher benefit of up to 8% per year. A benefit at age 70 will be 76-77% higher than the payout if you start at age 62.
Ultimately, factors such as your other income sources, marital status and health should guide your decision, not just when you can get the biggest Social Security paycheck.
Myth #3: When I retire from Southern California Edison doesn’t matter
No, no, no. When you retire has a major effect on the quality of your retirement.
For one, years of service is one of the primary factors in your pension calculation. Generally, the longer you work at Southern California Edison, the higher your pension. Your pension is also impacted by interest rates, which fluctuate. When rates are lowered, lump-sum pension payouts are increased, and vice versa.
Plus, Southern California Edison retirement benefits are not set in stone. They are subject to change. For example, the significant changes made to Southern California Edison’s pension calculation, health care subsidies and retiree health insurance.
You may find that it is more financially advantageous to retire sooner or later than your desired retirement date.
Myth #4: Southern California Edison stock is a good investment
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Something Southern California Edison employees should be aware of is that we commonly see employees invest an excessive amount of their 401(k) in their company’s stock. While it can be rewarding to own a piece of a respected company, it may be risky from a retirement planning perspective.
Firstly, most of your financial life becomes dependent on the performance of one company. That includes your current income and retirement income from the Southern California Edison pension and 401(k) plan (if Southern California Edison offers these to you). Such a high concentration of your financial well-being in a single company is risky. Secondly, a single stock can be riskier and more volatile than a mutual fund or the broader stock market. Therefore, the greater amount of Southern California Edison stock you have in your 401(k), the more you can expect your investment return to fluctuate.
It’s more appropriate to diversify the investment choices in your Southern California Edison 401(k) account (If Southern California Edison offers you a 401K). That means selling your company stock and investing in mutual funds. The right mix of funds depends on your specific needs, goals and level of risk you’re comfortable with.
Myth #5: It’s better to leave my 401(k) with my company.
Upon leaving Southern California Edison, you may leave some or all of your savings in your Southern California Edison 401(k) account (If this is offered to you). However, there are a variety of benefits to rolling over your 401(k) to an Individual Retirement Account (IRA). These include greater investment choices, greater withdrawal flexibility, more withholding options, and professional management by an advisor of your choosing.
When done properly, no tax applies to the rollover. One area of your 401(k) that provides no flexibility is tax withholdings.Every withdrawal is subject to a mandatory 20% federal tax plus applicable state taxes.
Myth #6: Medicare will cover my medical expenses
One of the biggest expenses for most people in retirement is health care. Taking the time to review your options can help you plan accordingly and avoid large out-of-pocket costs that could derail your retirement.
Once you turn 65 you are Medicare-eligible You and your Medicare-eligible dependents are required to enroll in Medicare Part A (hospital benefits) and Part B (doctor benefits). These two parts cover about 80% of health care benefits for individuals, so it’s important to consider your supplemental coverage options.
How does SoCalGas determine its pension contribution levels for 2024, and what factors influence the funding strategies to maintain financial stability? In preparing for the Test Year (TY) 2024, SoCalGas employs a detailed actuarial process to ascertain the necessary pension contributions. The actuarial valuation includes an assessment of the company's Projected Benefit Obligation (PBO) under Generally Accepted Accounting Principles (GAAP). These calculations incorporate variables such as current employee demographics, expected retirement ages, and market conditions. Additionally, SoCalGas must navigate external economic factors, including interest rates and economic forecasts, which can impact the funded status of its pension plans and the associated financial obligations.
SoCalGas determines its pension contribution levels using a detailed actuarial process that evaluates the Projected Benefit Obligation (PBO) under Generally Accepted Accounting Principles (GAAP). The contribution is influenced by variables such as employee demographics, retirement age expectations, market conditions, and external economic factors like interest rates and economic forecasts. SoCalGas maintains financial stability by adjusting funding strategies based on market returns and required amortization periods(Southern_California_Gas…).
What specific changes to SoCalGas's pension plan are being proposed for the upcoming fiscal year, and how will these changes impact existing employees and retirees? The proposals for the TY 2024 incorporate adjustments to the existing pension funding mechanisms, including the continuation of the two-way balancing account to account for fluctuations in pension costs. This measure is designed to stabilize funding while meeting both the service cost and the annual minimum contributions required under regulatory standards. Existing employees and retirees may see changes in their benefits as adjustments are made to align with these funding strategies, which may include modifications to expected payouts or contributions required from retirees depending on their service years and retirement age.
For the 2024 Test Year, SoCalGas is proposing to adjust its pension funding policy by shortening the amortization period for the PBO shortfall from fourteen to seven years. This change aims to fully fund the pension plan more quickly, improving long-term financial health while reducing intergenerational ratepayer burden. Existing employees and retirees may experience greater financial stability in the pension plan due to these proactive funding strategies(Southern_California_Gas…).
In what ways does SoCalGas's health care cost escalation projections for postretirement benefits compare with national trends, and what strategies are in place to manage these costs? The health care cost escalations required for the Postretirement Health and Welfare Benefits Other than Pension (PBOP) at SoCalGas have been developed in alignment with industry trends, which show consistent increases in health care expenses across the nation. Strategies implemented by SoCalGas involve negotiation with health care providers for favorable rates, introduction of health reimbursement accounts (HRAs), and ongoing assessments of utilization rates among retirees to identify potential savings. These measures aim to contain costs while ensuring that retirees maintain access to necessary healthcare services without a significant financial burden.
SoCalGas's healthcare cost projections for its Postretirement Benefits Other than Pensions (PBOP) align with national trends of increasing healthcare expenses. To manage these costs, SoCalGas employs strategies like negotiating favorable rates with providers, utilizing health reimbursement accounts (HRAs), and regularly assessing healthcare utilization. These efforts aim to control healthcare costs while ensuring that retirees receive necessary care(Southern_California_Gas…).
What resources are available to SoCalGas employees to help them understand their benefits and the changes that may occur in 2024? SoCalGas provides various resources to employees to clarify their benefits and upcoming changes, including dedicated HR representatives, comprehensive guides on benefits options, web-based portals, and informational seminars. Employees can access personalized accounts to view their specific benefits, contributions, and projections. Additionally, the company offers regular training sessions covering changes in benefits and how to navigate the retirement process effectively, empowering employees to make informed decisions regarding their retirement planning.
SoCalGas provides employees with various resources, including HR representatives, benefit guides, and web-based portals to help them understand their benefits. Employees also have access to personalized retirement accounts and training sessions that cover benefit changes and retirement planning, helping them make informed decisions regarding their future(Southern_California_Gas…).
How does the PBOP plan impact SoCalGas’s overall compensation strategy for attracting talent? The PBOP plan is a critical component of SoCalGas’s total compensation strategy, designed to attract and retain high-caliber talent in an increasingly competitive market. SoCalGas recognizes that comprehensive postretirement benefits enhance their appeal as an employer. The direct correlation between competitive benefits packages, including the PBOP plan's provisions for health care coverage and financial support during retirement, plays a significant role in talent acquisition and retention by providing peace of mind for employees about their long-term financial security.
SoCalGas's PBOP plan plays a crucial role in its overall compensation strategy by offering competitive postretirement health benefits that enhance the attractiveness of the company's total compensation package. This helps SoCalGas attract and retain a high-performing workforce, as comprehensive retirement and healthcare benefits are important factors for employees when choosing an employer(Southern_California_Gas…).
What are the anticipated trends in the pension and postretirement cost estimates for SoCalGas from 2024 through 2031, and what implications do these trends hold for financial planning? Anticipated trends in pension and postretirement cost estimates are projected to indicate gradual increases in these costs due to changing demographics, increasing life expectancies, and inflation impacting healthcare costs. Financial planning at SoCalGas thus necessitates a proactive approach to ensure adequate funding mechanisms are in place. This involves forecasting contributions that will remain in line with the projected obligations while also navigating regulatory requirements to avoid potential funding shortfalls or impacts on corporate finances.
SoCalGas anticipates gradual increases in pension and postretirement costs from 2024 to 2031 due to changing demographics, increased life expectancies, and rising healthcare costs. This trend implies that SoCalGas will need to implement robust financial planning strategies, including forecasting contributions and aligning funding mechanisms with regulatory requirements to avoid potential shortfalls(Southern_California_Gas…).
How do SoCalGas's pension plans compare with those offered by other utility companies in California in terms of competitiveness and sustainability? When evaluating SoCalGas's pension plans compared to other California utility companies, it becomes evident that SoCalGas's offerings emphasize not only competitive benefits but also a sustainable framework for its pension obligations. This comparative analysis includes studying funding ratios, benefit structures, and employee satisfaction levels. SoCalGas aims to maintain a robust pension plan that not only meets current employee needs but is also sustainable in the long term, adapting to changing economic conditions and workforce requirements while remaining compliant with state regulations.
SoCalGas's pension plans are competitive with those of other utility companies in California, with a focus on both benefit structure and long-term sustainability. SoCalGas emphasizes maintaining a robust pension plan that is adaptable to changing market conditions, regulatory requirements, and workforce needs. This allows the company to remain an attractive employer while ensuring the sustainability of its pension commitments(Southern_California_Gas…).
How can SoCalGas employees reach out for support regarding their pension and retirement benefits, and what types of inquiries can they make? Employees can contact SoCalGas’s Human Resources Benefits Department through dedicated communication channels such as the company’s HR support line, email, or scheduled one-on-one consultations. The HR team is trained to address a variety of inquiries related to pension benefits, eligibility requirements, plan options, and retirement planning strategies. Moreover, employees can request personalized benefits statements and assistance with understanding their entitlements and the implications of any regulatory changes affecting their plans.
SoCalGas employees can reach out to the company's HR Benefits Department through a dedicated support line, email, or consultations. They can inquire about pension benefits, eligibility, plan options, and retirement strategies. Employees may also request personalized benefits statements and clarification on regulatory changes that may affect their plans(Southern_California_Gas…).
What role does market volatility and economic conditions play in shaping the funding strategy of SoCalGas's pension plans? Market volatility and economic conditions play a significant role in shaping SoCalGas's pension funding strategy, influencing both asset returns and liabilities. Fluctuations in interest rates, market performance of invested pension assets, and changes in demographic factors directly affect the PBO calculation, requiring SoCalGas to adjust its funding strategy responsively. This involved the use of sophisticated financial modeling and scenario analysis to ensure that the pension plans remain adequately funded and financially viable despite adverse economic conditions, thereby protecting the interests of current and future beneficiaries.
Market volatility and economic conditions significantly impact SoCalGas's pension funding strategy, affecting both asset returns and liabilities. Factors like interest rates, market performance of pension assets, and demographic shifts influence the PBO calculation, prompting SoCalGas to adjust its funding strategy to ensure adequate pension funding and long-term plan viability(Southern_California_Gas…).
What steps have SoCalGas and SDG&E proposed to recover costs related to pension and PBOP to alleviate financial pressure on ratepayers? SoCalGas and SDG&E proposed implementing a two-way balancing account mechanism designed to smoothly recover the costs associated with their pension and PBOP plans. This initiative aims to ensure that any variances between projected and actual contributions are adjusted in a timely manner, thereby reducing the financial burden on ratepayers. By utilizing this approach, the Companies seek to maintain stable rates while ensuring that all pension obligations can be met without compromising operational integrity or service delivery to their customers. These questions reflect complex issues relevant to SoCalGas employees preparing for retirement and navigating the nuances of their benefits.
SoCalGas and SDG&E have proposed utilizing a two-way balancing account mechanism to recover pension and PBOP-related costs. This mechanism helps adjust for variances between projected and actual contributions, ensuring that costs are managed effectively and do not overly burden ratepayers. This approach aims to maintain stable rates while fulfilling pension obligations(Southern_California_Gas…).