19 Sep I’m a union employee. Is this savings plan good?

Q. I’m a union employee and I can contribute to an annuity with regular contributions from my paycheck. Is this a good way to invest?
— Still working

A. Let’s make sure we’re talking about the same kind of account.

It sounds like you are referring to a union 401(k), not actually an annuity, said Michael Cohen, a retirement specialist with Certainty Retirement Advisors in Belvidere.

“I’ve worked with many union employees in New Jersey and many of them have a 401(k) which is titled as ‘The Annuity Fund,’” he said. “Typically, this account is more like a traditional 401(k) wherein you contribute money to the account, sometimes you get a match, sometimes not.”

He said it’s a fine way to invest in your future and your retirement.

There are things to consider, though, he said.

Cohen said you should talk to your union representatives to learn more about this account and to find out when you are able to roll over the funds. At age 59 1/2, most plans allow the employee to roll their 401(k) into a new plan that is self-directed, Cohen said.

“Oftentimes, the employee is looking to take some chips off the table because retirement is not that far away,” he said. “Protecting some of those assets is wise when planning for retirement because leaving the money in that account, exposed to risky investments, can mean your retirement plans could be drastically altered depending on market performance or poor management by the union.”

Cohen said it would be smart to sit down with an independent advisor to review your options and put together a retirement plan that will ensure you will never run out of money during retirement.

The first place to start is with Social Security, which will hopefully give you some income guarantees for retirement.

“If retirement was a jigsaw puzzle, Social Security would be the edges and corners,” Cohen said. “You begin with what you know is coming to you, and put a plan together around that to supplement your income.”

Without proper planning, you run the risk of running out of money and finding yourself back to work when you should be traveling, dining out, seeing shows, and enjoying time with your children and grandchildren, he said.

Good luck!

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This story was originally published on September 20, 2019.

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