Workers will have to dig deeper for their retirement

The changing economy hasn't been good to many workers. Jobs have changed or even gone away along with pensions and retirement benefits.

Just ask the estimated 13,000 people who will lose their job at American Airlines as it restructures.

The fact of life is America's corporations are changing as they struggle to compete in a global market.

Fewer are offering benefits that were so popular with our parents and grandparents.

Instead of companies taking care of employees, employees now have to take care of themselves.

Workers today can expect to:

1. Save for their own retirement instead of having a pension to rely on.

2. Pay more for their own health care as companies pick up less of the insurance premium and out-of-pocket expenses.

3. Manage their own retirement plan through a 401(k) instead of relying on a defined benefit plan (pension).

4. Pay for more of their medical costs in retirement as companies pay fewer retiree health benefits.

American Airlines recently became the latest company to reduce worker benefits. It has told employees that it wants to do away with its pension plan and only offer employees a 401(k).

For employees who are in a 401(k) now and will lose their job, there is a silver lining — they no longer have to participate in the 401(k) plan. Any employee leaving a company that has a 401(k) can roll it over into an Individual Retirement Account. The benefits being:

1. Lower investment fees. 401(k)s can be one of the most expensive retirement plans available. The balances can be invested in lower-cost investment choices and not be subject to administrative fees.

2. More investment choices. Having an IRA opens a world of possibilities in where to invest money for retirement. The 401(k) typically has limited choices.

3. Allow a Roth Conversion. Rolling a 401(k) into an IRA allows for balances to be converted into a Roth IRA. This would allow future growth and retirement withdrawals to be tax free in return for paying the income tax now on the current balance, which should mean a total lower tax than in retirement. And now there is no longer an income limit to be eligible to convert.

4. More flexibility in beneficiaries. An IRA allows more options for who the money will be passed on to at death and opportunities to delay income taxes to the beneficiary.

If you are no longer participating in a 401(k) plan, consult an expert to determine if it would be best to roll it over into an IRA.

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