
Retirement Shock: Need to Find a Job After 40 Years at General Electric - thisisit
https://www.wsj.com/articles/retirement-shock-need-to-find-a-job-after-a-40-years-at-general-electric-1524418855
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this_user
This looks like a failure with portfolio construction to me. Keeping a lot of
your net worth in the stock of one company is not a very good strategy for
diversification. This is especially true when it is the stock of the company
that you are working for, because if the company gets into trouble, you might
not just lose your job, but also your savings.

One easy improvement your this particular case would have been to roll some of
the money from GE stocks into bonds and do a classic 60:40 split. If he really
wanted to stick with that company, he could have even bought GE bonds since
their default risk is reasonably low.

~~~
baldfat
I blame Corporations getting rid of Retirement Plans for the sake of profit.

My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years)
2) NYC Handy man (25 years)

My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician
Union 10+ years.

They both were able to live a decent life after retirement and didn't work a
single day afterwards. This will not happen for me. I also have a privatized
plan for 15 years but my son had cancer for 5 years (Drained my retirement
early) and we had 5 kids and chose to have my wife stay at home for about 7
years. Not very easy to save, heck I have no debit outside of mortgage and
some student loans still. Zero credit card debit and no car payment. I know I
am ahead of the curve but what about everyone else up to their necks in debit?

The system is broken and most people don't save enough and a few can't.
[https://www.bloomberg.com/view/articles/2017-01-03/the-401-k...](https://www.bloomberg.com/view/articles/2017-01-03/the-401-k-problem-
we-refuse-to-solve)

~~~
presidentender
> we had 5 kids and chose to have my wife stay at home for about 7 years

You and your wife chose to have five children, and chose for her to work as a
childcare provider, which we know is a low-paid gig.

I'm very impressed that you managed to do that without going into debt, but I
have little sympathy for other people who in similar situations find
themselves struggling: the rest of us derive a smaller benefit from the
continuation of your genetic legacy than you do, so it is appropriate that
society should pay a smaller part of the cost of that lifestyle choice.

People who fall into similar situations without your foresight might struggle
more, but so too do people who buy expensive cars they can't afford or pursue
careers they enjoy instead of careers that pay well.

~~~
ta76567656
Don't forget that 1) the first world birth rate is below replacement, and 2)
your retirement savings will be made worthless by inflation if there is no
labor pool to support the economy when you are retired. Parent poster is
arguably _subsidising_ your retirement by putting in the work to raise the
generation that will produce the goods and services you will wish to consume
in your retirement.

~~~
presidentender
I benefit just as much from parent's children (heh) as I would from yours, but
less than I would from my own, because they'd entertain me.

Parent's enjoyment of those children is an appropriate benefit which both
parent and parent's wife have purchased at the cost of parent's wife's career
and their retirement savings.

Put another way, parent and I both receive an economic benefit, but parent
receives an emotional benefit. You can argue that I should pay for the
economic benefit I receive, but I do not think it appropriate that I should
subsidize the price of his emotional benefit.

~~~
ta76567656
Empirically, seeing that couples in general find child rearing too burdensome
to maintain replacement rate, it seems that the current split is not the
correct one.

~~~
presidentender
That's only relevant if you restrict immigration from areas where growth is
rapid to areas where the locals reproduce below replacement.

~~~
ta76567656
That there are willing young immigrants available is a historical accident. As
countries develop economically their birth rates consistently drop, eventually
to below the replacement rate, as can be seen in almost all first world
countries. Taking first world countries as a closed system my argument
applies. Allowing for immigration means the system now depends on a pool of
readily available people who live in economic misery to supplement the first
world population, which is not a particularly ethical arrangement.

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overcast
I've always sold my company stocks soon as they were received. Then reinvested
those funds in in either Vanguard index funds, or paying off school loans.
Makes zero sense to tie up your entire income to one company. Your weekly
paycheck, AND stocks are totally reliant on the same company performance.

~~~
mirceal
this may be an unpopular opinion (especially if the stock is doing well) but
I've also done the exact same thing (sell on vest + diversify).

~~~
solotronics
if you think your company will outperform in the short term you could set up a
stop loss limit to allow only a certain percentage of loss in your company
stock that way you are only exposed to upside

~~~
brianwawok
limits are usually a guarantee you will sell at the very bottom of a crash.
There are much better ways to diversify.. such as what others said - sell on
the day you vest and buy an index fund.

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codemac
Remember to set up auto-sale folks.

Your retirement returns will be less than selling at a lifetime high price of
whoever you work for.

But you will not sell at the lifetime high price. Please don't forget to sell
at all.

~~~
madengr
It took a lawsuit for my employer (Honeywell) to allow moving (out of
Honeywell stock) of matched contributions. I still keep about 20% in company
stock. It has done very well and pays a good dividend. To think that we were
almost bought by GE years ago.

~~~
pg_bot
If you are a rank and file employee, I would suggest divesting entirely from
your company's stock. From a risk perspective it's extremely dangerous as you
are already dependent on your employer for your source of income. In the case
that they do poorly you have the potential to lose both your income and your
savings. Unless you have the ability to seriously affect the stock price, you
are putting too many eggs into a single basket.

~~~
pmiller2
There's no need to divest entirely, assuming a reasonable portion (say, no
more than 3-5%) of total holdings is in company stock. That said, I have heard
someone in my company say they refuse to invest in tech stocks at all, because
they're concerned about a sector-wide downturn taking out both their job and
their investment gains. I think that's a bit of an extreme position, but I
understand where it's coming from.

~~~
ajmurmann
It seems extreme but if you don't have enough other savings to bridge 1-2
years of joblessness I think it's very reasonable. The tech sector might tank
and come back but you need enough breath to wait for recovery.

------
virtuexru
> He left GE with an annual pension of $85,000 and company stock valued at
> more than $280,000.

> Retirement looked pretty good until GE shares collapsed. His shares are now
> worth about $110,000, prompting a late-life job hunt.

I don't understand; it says he has an $85,000 pension. Isn't that more than
enough to retire on? His stocks collapsed to about half their worth (roughly
$110,000). This isn't exactly a crazy one off scenario; if you are invested in
a single company and do not diversify, it's hard to place the blame on
"others" and "complain" about having to find another job after keeping an
almost six figure pension at the same time.

Is there a chance that GE could forfeit on their pension payout requirements
if they lose more capital? Not sure how that works so forgive my ignorance.

~~~
logfromblammo
The pension is 70% funded, so he can only count on $59500/year actually being
there. The likely scenario would be that all pensioners take the same
percentage of haircut as the pension obligation is transferred to another
company.

If he cashed out of GE and went into index funds, the stock portfolio would be
conservatively worth another $3300 a year.

That's still $62800/year. If he owns his home, that amount can fund his
retirement, until his first major medical expense.

~~~
gvb
US pensions are a guaranteed benefit, insured by the US government. If GE
defaults on the pension, the US government says they will step in as trustee
and will pay him the full $85,000/year.

Ref: [https://www.pbgc.gov/](https://www.pbgc.gov/)

~~~
sct202
This isn't completely correct. The pension is insured but the maximum monthly
benefit depends on a lot of factors. Zabroski is 61 and receives $7k per
month, the PBGC won't pay that much unless GE's pension goes bankrupt when he
is 67.

[https://www.pbgc.gov/wr/benefits/guaranteed-
benefits/maximum...](https://www.pbgc.gov/wr/benefits/guaranteed-
benefits/maximum-guarantee)

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pm90
Quote from the article:

> “Employees need to think very carefully about investing their own money
> beyond 10% in company stock,” said Corey Rosen, founder of the National
> Center for Employee Ownership, a nonprofit that works with companies. “If
> you are looking at retirement, then diversification is a good thing.”

The whole article seems to be "People trusted GE stock way too much; it went
down and they lost massively". This is another reason to be informed and
proactive about the basics of finances and where your money really is. Perhaps
I sound too harsh, but I simply fail to understand how all these people
thought that holding 6 figure amounts in a _single_ stock was a good idea? I
just do not get it... wouldn't any financial planner have recommended
diversification?

~~~
gascan
It's worth remembering that once upon a time, at least, there was no such
thing as index investing or even low cost investing. Trades & brokers were
expensive, and shares were frequently literally pieces of paper. My father
still has paper shares from that age. They live in a bank vault. Buying stock
directly from your employer skipped the broker & Wall Street.

We all know picking stocks is perilous- but what do you if it's 1970, six
years before VFINX was even created? You pick your own stocks, hire a broker,
or buy expensive mutual funds. Don't feel like a good stock picker? The safe
play, of course, is to buy big reputable companies with a long history of
stable stock- see, GE.

Anyway, I just wanted to point out it was something of a different world back
then. I think it wasn't even that long ago that you typically still had to buy
whole shares of things. Which, as I'm sure you can imagine, is a big part of
why DRIP is another recent phenomenon.

~~~
pm90
That's a great point and thanks for making it. Totally forgot that index funds
and electronic trading are very recent phenomena.

------
joshuaheard
Enron should have taught people not to keep all their investments in employer
stock. My question about this article is he has an $85,000 annual pension with
$280k in stock that sank to $110k in value. At 4%, the $280k would return an
additional $11,200 per year. That would be reduced to $4,400, a drop of less
than 10% of his annual income. For this he has to find a job?

~~~
dv_dt
Pensions end up tied to the health of the company too. Though they have some
protection in law, in practice there is still significant risk with company
pensions. There are cases when pensions promised healthcare but cut back
later:

"GE revised its GE Medicare Benefit Plans handbook in 2012, underscoring the
right to 'terminate, amend or replace the programs or plans, in whole or in
part (subject to applicable contractual requirements), at any time and for any
reason,' according to records in a 2014 lawsuit by two former GE employees,
alleging that GE violated an implied obligation to provide continued health-
care coverage. The clause existed in all previous versions of the handbook as
well, GE said."

[http://www.thefiscaltimes.com/2015/08/04/GE-Saved-
Billions-C...](http://www.thefiscaltimes.com/2015/08/04/GE-Saved-Billions-
Cutting-Retirees-Benefits)

All the more reason to diversify retirement funds which one has that option.

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dangerboysteve
Frontline did a nice story on this

[https://www.pbs.org/wgbh/frontline/film/retirement-
gamble/](https://www.pbs.org/wgbh/frontline/film/retirement-gamble/)

------
cgy1
Seems like an $85k/yr pension should be more than enough to retire on.

~~~
hinkley

        Roughly $140 billion in GE stock-market wealth was lost in the past year
    

GE has lost a substantial percent of its market cap this year. I wouldn't
count on that pension sticking around for 30 years without being
'restructured'.

And in 30 years it'll be worth $40k a year anyway.

~~~
esturk
I know it was only 1 guy, and an extreme example at that, but he is 61.
Getting 30 years is great. Most men won't get to 91. He can also consider
early retirement at 62.

------
brandonmenc
Speaking from experience (father worked at GE for roughly the same time as
this guy and is around his age), anyone who worked at GE for 40 years - even
the lowliest hourly employee - should have a massive pension and/or retirement
plan - and company health insurance to boot.

He didn't diversify. He definitely could have afforded to pay a money manager
on a GE salary.

At least he has that fat $85k/yr pension!

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hnaccy
Don't bet it all on one horse if you can help it.

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nunez
A lot of folks got screwed this way. Being a company lifer is risky.

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madengr
Got a non paywall link?

~~~
monocasa
[http://archive.is/RgZJi](http://archive.is/RgZJi)

~~~
aerotwelve
This is cool, thanks for sharing this site (archive.is).

Does this work because your browser was logged into a paid WSJ account
_before_ you used archive.is to log the page? Or is it only because WSJ's
paywall allows archiving sites to read full articles as a matter of policy?

Just curious to know how reliable this solution might be for other sites.

~~~
RandallBrown
WSJ allows archiving sites to read full articles.

Google requires anything reachable via their search engine isn't behind a
paywall. Paste the full URL into a google.com search and click the link.
You'll bypass the paywall, because google is the referrer.

WSJ and other news sites go along with this because it's not worth it for them
to be excluded from search indexes.

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znpy
The article is behind a paywall.

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gaius
100% of the blame lies with Jack Welch and his short-term thinking, reckless
cuts that hollowed out the company, well now those bills are due.

Did you know his own retirement package included lifetime usage of the
corporate jets?

~~~
beastman82
So Jeff Immelt and his 16 year reign is 0%? C'mon.

~~~
gaius
Welch was responsible for the culture change at GE, so yes. Immelt just
continued what his master started

