By Nino Pavan, J.D., CFP®
Southern California Edison employs around 12,000 people across six continents. When it comes to retirement planning, some SoCal Edison workers may find themselves behind in making contributions to their retirement funds. This can especially be a problem for older workers who may be falling short of their contribution goals.
Thankfully, by leveraging a few effective retirement planning strategies, Edison workers can expedite and maximize their contributions in a relatively short time frame. Let’s discuss 4 such strategies.
1. Know Your Benefits
The first step in retirement planning is getting a full understanding of your current benefit plans. SoCal Edison offers both 401(k) and pension plans.
Deductions from employee paychecks fund 401(k) plans, and SoCal Edison management may match part or all of their employees’ monthly contributions. The company fully funds pension plans based on their employees’ years of service and base salary.
The more you contribute to your 401(k) plan, the more SoCal Edison can match up to your monthly limits. This essentially amounts to free money that gets added to your retirement account. Those who start their plans early enough can take advantage of compound interest, which can multiply your investments.
Pension plans, on the other hand, come in a range of options. A defined benefit plan guarantees monthly payments during retirement, while a cash balance plan works like an employer-funded 401(k) and gives you a lump sum or annuity when you retire.
Whichever plan you choose, always verify that you’re fully up to date on the terms to avoid surprises.
2. Maximize 401(k) and Catch-Up Contributions
The IRS sets annual contribution limits for employees with 401(k) plans. For 2024, that limit is $23,000; if you’re age 50 and over, you can contribute another $7,500 to help you “catch up,” for a total of $30,500.
For retirement planning, 401(k) plans are useful because they allow you to choose from a variety of investment options; from conservative choices such as money market funds to aggressive options like small-cap stocks. This flexibility means you can tailor your investment strategy based on your personal risk tolerance and retirement goals. Regularly reviewing and adjusting your 401(k) investments can help keep them aligned with your retirement strategy.
To make catch-up contributions, workers age 50 and older need to take their overall financial situations into account. Verify your plan limits for catching up.
3. Consider Alternative Compensation Plans
SoCal Edison employees may consider a couple of options for funding investments, including deferred compensation and non-retirement savings.
Deferred Compensation Plans
In a deferred compensation plan, an individual requests a delay in receiving some of their compensation. Many choose to take deferred compensation after they retire. By doing so, they reduce their current taxable income and save money on taxes. Such a plan can guard against investment losses and offer better access to employer-provided benefits after retirement.
Non-Retirement Savings Options
Health savings accounts (HSAs) provide ways for Edison employees with high premiums to save on healthcare expenses. They come with a “triple-tax” advantage in which contributions are tax-deductible, while investment growth and qualified withdrawals are tax-free.
With a taxable brokerage account, you can invest in several assets without taking tax benefits. This could be helpful to those who have maxed out other tax-advantaged retirement plans and want to save money for a car, a child’s education, and other major investments.
Other strategies that can maximize your investment capital include paying off high-interest debt, reducing unnecessary expenses and channeling them into retirement, and doing annual financial check-ups.
4. Get Professional Retirement Planning Guidance
The highly qualified team at Financial Designs is committed to helping SoCal Edison workers make better decisions about retirement planning. You can connect with us online to learn more. To schedule a no-obligation consultation, call (909) 626-1642 or email fdc@fdcadvisors.com today!
About Nino
Nino Pavan is President and a CERTIFIED FINANCIAL PLANNER® professional at Financial Designs, a retirement planning firm in Claremont, California, with the mission of enabling individuals and families to financially prepare for and confidently enjoy their retirement years through goal-centered planning. With more than 30 years in the financial services industry, Nino is thankful for the opportunity to serve his clients by making the retirement process a stress-free one; he worries about their money so they don’t have to!
Nino holds a law degree from the University of Southern California, a Bachelor of Science in Telecommunications Management from DeVry Institute of Technology and has been a contributing advisor to Kiplinger. In addition to being a CERTIFIED FINANCIAL PLANNER® professional and Investment Advisor Representative, Nino has passed the Series 7, 24, and 63 securities exams and holds life and disability insurance licenses. He also conducts retirement and estate planning workshops for employees of major California companies. Outside of the office, Nino enjoys sports (regular and fantasy), traveling (specifically tropical destinations), walking, pickleball, church activities, and spending time with his wife Sherry and their two children, Derek and Sara. To learn more about Nino, connect with him on LinkedIn.
