Interestingly, this blog post was spawned as a result of a significant modification to the retirement expectations for some of our clients. Many are fearful that either their pensions will be cut or they won’t have enough guaranteed income at retirement.   After reviewing the employer’s documents, it became obvious that it wasn’t a time to panic; but instead, it was a time to reevaluate their retirement goals and objectives. The change being enacted by their employer’s DB Plan created a call to action.   

If you asked employees of an organization or company that offers a Defined Benefit Plan (“DB Plan”) to describe what they are participating in, the top answer is usually; “it’s a Plan that issues me a check when I retire”.  While that is fundamentally correct, the truth is that a DB Plan is a giant annuity put in place by an employer which doesn’t require the beneficiary to make any contributions.  Instead the employer contributes assets most, if not all, years to a fund which is expected to grow and provide lifetime income to the participants (employees) and possibly a beneficiary.  

Historically, DB Plans were associated with mid-to-large sized businesses or government entities.  For most small employers this was not a viable option due to the prohibitive cost to construct and maintain a DB Plan when comparing it to a 401(k), SIMPLE or SEP-IRA. However, over time the cost to create and administrator DB Plans has declined to make them a competitive retirement opportunity.  Yet few small business owners have heard of or taken advantage of this powerful tool.   Have you considered this?    The topic will be covered in a future newsletter allowing our readers that fall into that category to determine if they are missing out on a great benefit.

Now for some readers the concept of a DB Plan won’t apply. Yet you may know someone else that could be helped by this information.  If so, they can go to our website www.trgcap.com and secure a copy by entering their email address.  What a great way to help a colleague, friend or family member!

Tom is the Founder of TRG and has been the President and Chief Investment Officer since 2008.