Boeing offers many perks to its employees, including tuition reimbursement and competitive salaries. It also offers a robust pension plan for engineers. Those in the SPEEA union can choose a lump sum or regular monthly payments at retirement.
The amount calculated as a lump sum equivalent to a lifetime of monthly payments varies based on interest rates. Rising segment rates could slash this amount, so careful analysis is necessary.
Paying Off High-Cost Debt
First and foremost, pay off any credit card debt and fully fund your emergency savings. Your next priority should be saving 15% of your pretax income toward retirement, including employer matches. The pension plan for Boeing engineers, a union group known as the Society of Professional Engineering Employees in Aerospace (SPEEA), offers two choices upon retirement: a lump sum payment or a lifetime check. Many engineers have opted for the lump sum in recent years.
Interest rates are rising, which could significantly cut the lump sum payment amount (assuming you choose that option). If this continues into 2023, when segment rates are updated, it would mean a significant drop in the lump sum. It may make the Boeing pension lump sum choice even more attractive.
Creating a Monthly Budget
Look at your monthly expenses, such as your mortgage or rent, utilities, transportation, and food. Also, consider your discretionary spending, such as eating, watching a movie, or taking a vacation. Then, subtract your net monthly income from your total expenses. Setting aside some money each month for savings or a rainy-day fund is a good idea if there is room in your budget.
Finally, consider any big-ticket items you’ll need to pay for shortly, such as a new roof or car. Add up those annual expenses and divide by 12. That will give you an approximate amount to put away monthly in a separate savings account. Then you’ll be prepared when those bills come due.
Investing
The Boeing Company Voluntary Investment Plan (VIP) provides various investment options for eligible employees. Investors can find more information about the VIPs’ VIP investments, including objectives, strategies, fees, performance, and risks, by reviewing Fund Fact Sheets on the website or calling the Boeing Retirement Service Center through Boeing TotalAccess.
A financial advisor can help a Boeing engineer decide how best to manage their post-work years. They can also work with employees to help them understand their retirement cash flow, determine acceptable risk, and grow their savings.
Employees can also consider rolling over a portion of their VIP distribution or withdrawal to an IRA or another employer’s retirement plan. They should verify the other plan, or the IRA will accept their rollover request before doing so.
Planning for Healthcare Costs
Healthcare expenses can make up a large portion of a retirement budget, so it’s essential to account for them early on. A wealth advisor can help you estimate your medical costs and plan accordingly. Knowing what your insurance covers annually is also helpful in budgeting appropriately.
It can help you identify any gaps you may want to fill with other savings or your pension. Suppose you leave Boeing with a VIP account. In that case, you can have a direct rollover of all or a portion of your distribution directly into an IRA (including a Roth IRA), a qualified employer’s plan, or a SIMPLE IRA. Please note that the IRS limits these contributions. These limits are subject to change.
Creating a Separate Emergency Account
Whether you receive a lump sum or a pension, it is essential to understand how each distribution option will impact your long-term financial well-being.
Consider running your options through a fiduciary financial planner to help you fully understand the strengths and weaknesses of each. Opening a separate emergency account for unforeseen costs like auto or medical bills is also crucial.
Conclusion
A well-conceived financial strategy can help you maximize retirement, determine acceptable risk, and grow assets. However, the key is to stay committed to your financial goals. Every time you get a raise or salary bonus, increase your contribution percentage and put the extra money toward your goal. Investing that extra money will help you achieve your retirement goals faster.
