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Ready, Set, Retire: Navigating Your Financial Future post-SCE

Retirement is no easy transition, regardless of whether it is on your terms or not. We have helped hundreds of people retire, and with each retiree, we have experienced the challenges (emotional and financial) that come with making this big decision. While some have been mentally preparing for years, it is still an intimidating moment when it is right up against you. However, there is quite a bit you can do ahead of time to help make the transition smooth, comfortable, and positive. You have dedicated your life and career to a company. Deciding to dedicate the golden years to prioritizing yourself and what is important to you is not as easy as flipping a switch; it requires a bit of rewiring, the right equipment, a how-to guide, and the motivation (and partner) to implement.

As a Southern California Edison (SCE) employee approaching retirement, you must be well-prepared and informed about the benefits and choices ahead. Let us explore the essentials of your SCE retirement benefits to ensure you can look forward to a secure and rewarding future.

Understanding Your SCE Pension and 401(k) Savings Plan

At SCE, you have pension plans with distinct options to support you throughout your retirement. Whether you are part of the grandfathered plan or the cash balance plan, each offers distinct benefits based on factors like your length of service, age, and salary. These plans are foundational to your retirement landscape, designed to grow, and provide long-term stability.

If you are under the grandfathered plan, your benefit grows based on time of service, pay, and age. The lump sum value is calculated using the present value of the annuity payments. In short, your lump sum benefit is lower when interest rates are higher. 

If you are a part of the cash balance plan, your benefit grows based on pay and interest rates, and the account balance is used to determine your monthly annuity payments. In contrast to the grandfather plan, you receive a higher lump sum when interest rates are higher. 

Unfortunately, the pension is not offered to employees hired after 1/1/2017, meaning you will have to save even more diligently for your future retirement than your predecessors. 

The SCE 401(k) Savings Plan is another crucial element in your retirement toolkit. It is designed to complement your pension benefits and provide additional financial security. You can significantly increase your retirement savings by actively contributing to your 401(k), especially to meet the maximum company match. SCE will match the first 6% you contribute; these contributions go into the traditional 401k. If you were hired after 1/1/2017, SCE matches up to 10%. SCE offers both Traditional (pre-tax) and Roth (after-tax) options, allowing you to manage your tax liability according to your financial strategy.

The Roadmap to Retirement

Choosing when to retire is a momentous decision. Just as in strategic planning, timing is everything. Make sure to familiarize yourself with the procedural requirements at SCE, such as the advance notice period required before your intended retirement date. Additionally, understanding how benefits like sick time and vacation pay are processed will help you avoid any surprises and manage your finances more effectively.

For example, if you want to retire on July 1st, 2024, the following dates are crucial:

  • Last day to notify SCE:  May 28, 2024 (One month before Last Day Worked)
  • Last Day Worked:  June 28, 2024
  • Benefit Commencement Date: July 1, 2024* 
    • *Important for Grandfathered employees if retiring at year-end!

Vacation pay is made as a separate payment at the time of your final paycheck and will be taxed as ordinary income. Sick-time treatment is dependent on your worker status and is eligible to be rolled over into your retirement account.

  • Non-Union Cash Balance = No Sick Pay
  • Union Cash Balance = 20% Sick Time Pay Out, which will be paid out as a lump sum.
  • Grandfathered = 20% Sick Time Pay Out. Grandfathered employees are generally paid out monthly starting the month after retirement. This is only for grandfathered employees.

Ensuring a Prosperous Retirement

Deciding how much money you will need in retirement is akin to planning a long-term budget. Aiming for about 75% of your last salary as your retirement income is generally recommended, considering reductions in mortgage payments, child-related costs, and commuting expenses. Consider other potential income sources, such as Social Security, part-time work, or investments, which can all contribute to a comfortable retirement lifestyle. When you finally decide to retire, you will need to make decisions regarding the 401k you have built up over the years and your pension plan. There is no right or wrong way to retire; it is personal to you and your future needs. 

Actionable Steps to Secure Your Future

  1. Boost Your Savings: Take full advantage of SCE’s 401(k) plan by contributing enough to get the maximum employer match. Assess whether the Traditional or Roth contribution options best fit your financial situation to optimize tax benefits.

  2. Mark Your Calendar: Plan your retirement date wewll in advance. Set reminders for critical dates, such as when to notify SCE of your retirement, to ensure a smooth transition.

  3. Meet with a financial advisor to help you answer the following questions: 
  • Do I have enough to retire?
  • How much income will my investments generate in retirement?
  • When should I start Social Security benefits?
  • How will I pay for health care and medical expenses?
  • How can I protect my capital from a potential market crash?

By taking these steps, you will pave the way for a stable and fulfilling retirement. Remember, it is never too early to start planning, and the more prepared you are, the more enjoyable and secure your retirement will be. At KWB Wealth, we are here to support you in preparing for this exciting new chapter of your life. Let’s make your golden years shine bright!

Schedule a complimentary consultation with an advisor today: kwbwealth.com/lets-talk

 ~ Diana Sailler