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Retirement Shock: Need to Find a Job After 40 Years at General Electric
- codemac 9y agoRemember to set up auto-sale folks. Your retirement returns will be less than selling at a lifetime high price of whoever you work for. But you will not sell at the lifetime high price. Please don't forget to sell at all.
- madengr 9y agoIt took a lawsuit for my employer (Honeywell) to allow moving (out of Honeywell stock) of matched contributions. I still keep about 20% in company stock. It has done very well and pays a good dividend. To think that we were almost bought by GE years ago.
- froindt 9y ago>I still keep about 20% in company stock. It has done very well and pays a good dividend. To think that we were almost bought by GE years ago. I'm curious why you keep so much in Honeywell stock? For a very long time GE was a great company to have that would routinely give nice returns and dividends, and then things went downhill. Layoffs happened, and those people were faced with much lower portfolio valuations if they were heavily weighted in the company they work for.
- ataturk 9y agoAfter watching GE flounder in Schenectady, NY for my entire lifetime, I'm not sure GE was ever a nice company. It's best days seem way behind it. Plus, Edison was an asshole.
- madengr 9y ago$2.3k/year in reinvested dividends. $18.5k contribution + $10.5k employee match + $2.3k dividends. The dividends are like an additional 7% bump in contribution.
- evanpw 9y agoI've never understood why people care so much about dividends. The stock price drops by the amount of the dividend on the ex-date, so a stock with dividends that are always reinvested is equivalent to a stock that never pays any dividends. (Unless you're holding it in a taxable account, in which case you have to pay taxes on the dividend and actually come out behind).
- fibbery 9y agoI like dividend stocks because it is automatically increasing my number of shares in a stock I like, and thereby 'bakes in' the gains. A stock that doesn't have dividends must be sold in order to reap profits, and as a novice investor I never know when to sell.
- pg_bot 9y agoIf you are a rank and file employee, I would suggest divesting entirely from your company's stock. From a risk perspective it's extremely dangerous as you are already dependent on your employer for your source of income. In the case that they do poorly you have the potential to lose both your income and your savings. Unless you have the ability to seriously affect the stock price, you are putting too many eggs into a single basket.
- Retric 9y agoWith matched contributions it's a hard choice. You are effectively buying stock at a huge discount, having up to say say 20% of your savings in the company stock is very likely to be a good idea. You just need to be selling it ASAP.
- acjohnson55 9y agoNot sure that's universally a good idea. Rank-and-file may still have inside information that makes holding stock advantageous (obviously adhering to any applicable insider trading rules). If your skillset is highly portable, you can probably consider your income decoupled from your employer. Your equity with your employer could then be considered high-risk moonshot investment. But I certainly agree that your core nest egg and growth investment be kept totally decoupled.
- xiphias 9y agoEvery employee has insider information. For me at Google the biggest change was from Eric Schmidt answering directly to questions at TGIF and looking at easy to fix things when he could and looking for great growth possibilities to Larry Page talking about working hard for the sake of working hard to finally Sundar who's looking at Larry for every question and make sure to answer as politically as he can and not upset Larry. Also even project level big meetings took more than 50% of the time to speak about respecting women. I respect women, but when the focus on them is bigger than the focus on users/customers, I know it can't be the growth company that it was before.
- pmiller2 9y ago
- ghaff 9y agoOr, at a minimum, at least don't get too greedy. I got (somewhat) lucky with the dot-com crash. My prior employer's stock (which I had been accumulating over a decade from a previous employer who got purchased) lost about 95% of its value. Fortunately, I had sold some and the stock did end up recovering a bit.
- madengr 9y agoGot a non paywall link?
- KarenSatantsby 9y agolook up the title in Duckduckgo and the link will open the story all the way
- monocasa 9y agohttp://archive.is/RgZJi http://archive.is/RgZJi
- aerotwelve 9y agoThis is cool, thanks for sharing this site (archive.is). Does this work because your browser was logged into a paid WSJ account before you used archive.is to log the page? Or is it only because WSJ's paywall allows archiving sites to read full articles as a matter of policy? Just curious to know how reliable this solution might be for other sites.
- intopieces 9y agoI have no WSJ account. The service apparently does, since I use it to get around their paywall pretty often
- RandallBrown 9y agoWSJ allows archiving sites to read full articles. Google requires anything reachable via their search engine isn't behind a paywall. Paste the full URL into a google.com search and click the link. You'll bypass the paywall, because google is the referrer. WSJ and other news sites go along with this because it's not worth it for them to be excluded from search indexes.
- edem 9y agoSearch for the title on google.
- phamjamstudio 9y ago
- znpy 9y agoThe article is behind a paywall.
- cgy1 9y agoSeems like an $85k/yr pension should be more than enough to retire on.
- hinkley 9y agoRoughly $140 billion in GE stock-market wealth was lost in the past year GE has lost a substantial percent of its market cap this year. I wouldn't count on that pension sticking around for 30 years without being 'restructured'. And in 30 years it'll be worth $40k a year anyway.
- esturk 9y agoI know it was only 1 guy, and an extreme example at that, but he is 61. Getting 30 years is great. Most men won't get to 91. He can also consider early retirement at 62.
- ataturk 9y agoEveryone is trying to weasel out of their pension obligations. They made these promises to their workers--"If you work for less money, we've got you covered in retirement." It was a stinking lie.
- tspike 9y agoNo kidding, at a 4% safe withdrawal rate, that's the same as a $2+ million nest egg. That said, I think he's concerned that, given GE's trajectory, the pension will evaporate. What then?
- hnaccy 9y agoDon't bet it all on one horse if you can help it.
- this_user 9y agoThis looks like a failure with portfolio construction to me. Keeping a lot of your net worth in the stock of one company is not a very good strategy for diversification. This is especially true when it is the stock of the company that you are working for, because if the company gets into trouble, you might not just lose your job, but also your savings. One easy improvement your this particular case would have been to roll some of the money from GE stocks into bonds and do a classic 60:40 split. If he really wanted to stick with that company, he could have even bought GE bonds since their default risk is reasonably low.
- herodotus 9y agoI have to agree with you. I always took a very conservative approach and divested my company shares in order to diversify, even before I retired. In my case, the pain came not from stock losses, but from their gains. I "lost" so much by selling shares too soon. But now I am diversified and can survive a loss of my holding in my (former) companies shares (I still own some).
- ISL 9y agoDecisions can only be judged in the context within which they were made. Diversifying is a wise move for strongly mitigating downside risk. One of the wisest and thoughtful people I know was a long-time and early employee at a major tech company. That friend did exactly the same thing, diversifying early. It is difficult to overstate how successful he has become in life; success need not be measured in dollars.
- singhrk 9y agoI feel like framing your first sentence and put it a place where I can see/show it everyday !
- annotatedobj 9y agoyours (and parent's) comments is why I like HN
- overcast 9y agoI've always sold my company stocks soon as they were received. Then reinvested those funds in in either Vanguard index funds, or paying off school loans. Makes zero sense to tie up your entire income to one company. Your weekly paycheck, AND stocks are totally reliant on the same company performance.
- deleted 9y ago[deleted]
- mirceal 9y agothis may be an unpopular opinion (especially if the stock is doing well) but I've also done the exact same thing (sell on vest + diversify).
- solotronics 9y agoif you think your company will outperform in the short term you could set up a stop loss limit to allow only a certain percentage of loss in your company stock that way you are only exposed to upside
- brianwawok 9y agolimits are usually a guarantee you will sell at the very bottom of a crash. There are much better ways to diversify.. such as what others said - sell on the day you vest and buy an index fund.
- amorphid 9y ago>> if you think your company will outperform in the short term... I believe no one can reliable predict which way a stock is likely to go. If there is a way to predict, only a few people know, and that prediction is soon baked into the stock price.
- himom 9y agoIt’s a conservative play but an understandable one for older employees: it’s usually too risky to both work at a company and hold its stock. Diversify also means more than stocks and bonds... land, art, apartment buildings, laundromats, etc. https://www.betterment.com/resources/should-i-own-stock-in-the-company-where-i-work/ https://www.betterment.com/resources/should-i-own-stock-in-t...
- pm90 9y agoQuote from the article: > “Employees need to think very carefully about investing their own money beyond 10% in company stock,” said Corey Rosen, founder of the National Center for Employee Ownership, a nonprofit that works with companies. “If you are looking at retirement, then diversification is a good thing.” The whole article seems to be "People trusted GE stock way too much; it went down and they lost massively". This is another reason to be informed and proactive about the basics of finances and where your money really is. Perhaps I sound too harsh, but I simply fail to understand how all these people thought that holding 6 figure amounts in a single stock was a good idea? I just do not get it... wouldn't any financial planner have recommended diversification?
- Someone1234 9y ago> Perhaps I sound too harsh, but I simply fail to understand how all these people thought that holding 6 figure amounts in a single stock was a good idea? Indeed. But yet people in this thread are advising moving it all to just a single index fund. While index funds are somewhat diversified many suffer from over-investment into specific industries like tech. If the .COM bubble burst again tomorrow several of the most popular index funds with be hit hard... For example, look at the popular Vanguard Total Stock Market Index Fund, 20% in Technology, and 20% in financial, but if you dig into the financial portfolio you'd realize that a pop in tech would also sink many of the investment companies in financial too. I guess what I am saying is, an index fund is better than a single company holding, but it isn't a broadly diversified portfolio. If you want a diversified portfolio it will cost you, since many of the alternatives don't perform as well (e.g. international index funds, small-cap, etc).
- astura 9y agoThat's why people close to retirement or who are in retirement need to change their asset allocation. Nobody is suggesting a retiree should hold 100% equities.
- gascan 9y agoIt's worth remembering that once upon a time, at least, there was no such thing as index investing or even low cost investing. Trades & brokers were expensive, and shares were frequently literally pieces of paper. My father still has paper shares from that age. They live in a bank vault. Buying stock directly from your employer skipped the broker & Wall Street. We all know picking stocks is perilous- but what do you if it's 1970, six years before VFINX was even created? You pick your own stocks, hire a broker, or buy expensive mutual funds. Don't feel like a good stock picker? The safe play, of course, is to buy big reputable companies with a long history of stable stock- see, GE. Anyway, I just wanted to point out it was something of a different world back then. I think it wasn't even that long ago that you typically still had to buy whole shares of things. Which, as I'm sure you can imagine, is a big part of why DRIP is another recent phenomenon.
- virtuexru 9y ago> He left GE with an annual pension of $85,000 and company stock valued at more than $280,000. > Retirement looked pretty good until GE shares collapsed. His shares are now worth about $110,000, prompting a late-life job hunt. I don't understand; it says he has an $85,000 pension. Isn't that more than enough to retire on? His stocks collapsed to about half their worth (roughly $110,000). This isn't exactly a crazy one off scenario; if you are invested in a single company and do not diversify, it's hard to place the blame on "others" and "complain" about having to find another job after keeping an almost six figure pension at the same time. Is there a chance that GE could forfeit on their pension payout requirements if they lose more capital? Not sure how that works so forgive my ignorance.
- logfromblammo 9y agoThe pension is 70% funded, so he can only count on $59500/year actually being there. The likely scenario would be that all pensioners take the same percentage of haircut as the pension obligation is transferred to another company. If he cashed out of GE and went into index funds, the stock portfolio would be conservatively worth another $3300 a year. That's still $62800/year. If he owns his home, that amount can fund his retirement, until his first major medical expense.
- gvb 9y agoUS pensions are a guaranteed benefit, insured by the US government. If GE defaults on the pension, the US government says they will step in as trustee and will pay him the full $85,000/year. Ref: https://www.pbgc.gov/ https://www.pbgc.gov/
- sct202 9y agoThis isn't completely correct. The pension is insured but the maximum monthly benefit depends on a lot of factors. Zabroski is 61 and receives $7k per month, the PBGC won't pay that much unless GE's pension goes bankrupt when he is 67. https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum...
- gaius 9y ago100% of the blame lies with Jack Welch and his short-term thinking, reckless cuts that hollowed out the company, well now those bills are due. Did you know his own retirement package included lifetime usage of the corporate jets?
- beastman82 9y agoSo Jeff Immelt and his 16 year reign is 0%? C'mon.
- gaius 9y agoWelch was responsible for the culture change at GE, so yes. Immelt just continued what his master started
- dangerboysteve 9y agoFrontline did a nice story on this https://www.pbs.org/wgbh/frontline/film/retirement-gamble/ https://www.pbs.org/wgbh/frontline/film/retirement-gamble/
- joshuaheard 9y agoEnron should have taught people not to keep all their investments in employer stock. My question about this article is he has an $85,000 annual pension with $280k in stock that sank to $110k in value. At 4%, the $280k would return an additional $11,200 per year. That would be reduced to $4,400, a drop of less than 10% of his annual income. For this he has to find a job?
- dv_dt 9y agoPensions end up tied to the health of the company too. Though they have some protection in law, in practice there is still significant risk with company pensions. There are cases when pensions promised healthcare but cut back later: "GE revised its GE Medicare Benefit Plans handbook in 2012, underscoring the right to 'terminate, amend or replace the programs or plans, in whole or in part (subject to applicable contractual requirements), at any time and for any reason,' according to records in a 2014 lawsuit by two former GE employees, alleging that GE violated an implied obligation to provide continued health-care coverage. The clause existed in all previous versions of the handbook as well, GE said." http://www.thefiscaltimes.com/2015/08/04/GE-Saved-Billions-Cutting-Retirees-Benefits http://www.thefiscaltimes.com/2015/08/04/GE-Saved-Billions-C... All the more reason to diversify retirement funds which one has that option.
- brandonmenc 9y agoSpeaking from experience (father worked at GE for roughly the same time as this guy and is around his age), anyone who worked at GE for 40 years - even the lowliest hourly employee - should have a massive pension and/or retirement plan - and company health insurance to boot. He didn't diversify. He definitely could have afforded to pay a money manager on a GE salary. At least he has that fat $85k/yr pension!
- nunez 9y agoA lot of folks got screwed this way. Being a company lifer is risky.