De-risking is the idea that employers with underfunded defined pension plans (such as Ford and General Motors) can reduce their risk exposure by offering employees the option to convert their plan into a lump sum payout. The concept sounds good for business but is it good for you? Jay Sushelsky, a Senior Attorney at the AARP Foundation says it’s one of the latest threats to pension security. The company eliminates the risk by handing it all over to the employee who may or may not have the capacity to manage the funds nor the know-how to find someone who can. The risk to the employee is that what can seem a truly large sum of money will need to last throughout their lives so in a rarity, healthier beneficiaries are likely to do less well than their counterparts. Here’s a link to a fact sheet about de-risking done by the Pension Rights Center. It offers some suggestions about whether it’s a step you want to take and how it might impact you. As with most things that you have never done before, find an attorney or financial adviser that can provide advice on whether or not it’s a good option for you and then direct you through the process so that you don’t have your own fiscal cliff.
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