Getting the most from your union retirement plan

Most unions provide their members with a retirement plan. But each union plan is different, with the details set by the collective bargaining agreement. Your union-sponsored retirement plan is a critical tool in helping you save for retirement—so take the time to understand what it offers and how to make the most of it. No matter how far off retirement may be, it’s never too early to plan for your future.

Learning the ins and outs of your Taft-Hartley retirement plan

As a union member, it’s very likely (94% likely, in fact) that you have access to retirement benefits paid by your employers, whereas only 67% of nonunion workers have that same access.1 In most cases, you’re automatically enrolled when you begin working with the union. To find out about the particulars of your plan—if you don’t know them already—contact your union office. 

  • Most union plans start with a defined benefit plan, which is a type of pension plan. Your employer—or employers—makes regular contributions on your behalf, using a formula based on your years of service, hours worked, pay, or other factors negotiated by your collective bargaining unit. The money is invested and managed for you, and it grows tax deferred over the course of your career. You don’t pay any taxes on the money until it’s distributed to you, ideally at retirement, when your tax rate may be lower. 
  • Some unions also let you save through a 401(k) plan, which is a great way to supplement your savings—and contributing is voluntary. You decide how much to set aside each payday. Your contributions go right from your paycheck to your plan account—before taxes—so your take-home pay is reduced by less than the amount you’re contributing. As with a pension plan, your money and your earnings aren’t taxed until you withdraw them. You can choose your investments—or be automatically invested by the plan. And the earlier you start saving, even with small contributions, the more time you give your money to grow and take advantage of compounding, which is when your investments and the earnings they generate also earn interest. So the longer you save, the more time your earnings have to compound and grow. 

No matter which type of plan your union offers, you’ll get regular statements, so you can see your balance—and you’ll likely be able to view your account online. 

Thinking about a loan from your plan? Be cautious!

Your plan may provide a way to borrow money if you’re caught in an unexpected financial crunch. Typically, interest rates for a plan loan are lower than borrowing from other sources, and you don’t have to apply for credit. But there are a few important negatives to consider before taking a loan from your retirement plan: 

  • Your money is no longer working for you by generating earnings or compounding. 
  • You’ll be taxed twice—first when you pay back your plan loan with after-tax dollars, then again when you withdraw the money at retirement. 
  • If your work is seasonal, you may also be increasing the risk of defaulting on a loan, which can have serious tax consequences. 
  • Even though the interest rate may be attractive, you’ll still have to pay fees on the loan.

You may also have the option to take a hardship withdrawal from your plan. But again, consider that you’re taking money from your own future. You’d be in the position of having to build your savings back up again—and would likely have fewer years to do so.

Planning ahead for your retirement savings

Establish some good financial habits, so you don’t have to borrow from your future. Tap into planning and budgeting tools through your plan or other trusted sources to help you manage your finances today and get a feel for how much you’ll need in retirement. Set up an emergency savings account—and include saving for unexpected expenses in your budget—so that when an emergency occurs, you don’t have to put it on a credit card or borrow money to cover the cost. 

Looking ahead, you’ll also want to calculate how much you can expect to have available from your retirement plans and Social Security. If your budgeted expenses are more than you expect to have, you can look at options, including increasing the amount you’re saving if your plan offers a 401(k)—or saving through an IRA.

Considering early retirement

Many union jobs require physically hard work, so you may be wondering if you can afford to retire early (e.g., by your mid-50s). While pension plans typically don’t start paying benefits until age 60 or 62—and Social Security generally isn’t available until you reach age 62, at the earliest—having other savings may help you bridge those years.

Staying the course

No matter how your union retirement plan is designed, it’s there to help you save for retirement. Be sure to find out more from your union office about how your particular plan can help you prepare for the retirement you want. 

1Union workers more likely than nonunion workers to have retirement benefits in 2019,” U.S. Bureau of Labor Statistics, bls.gov/opub/ted/2019/union-workers-more-likely-than-nonunion-workers-to-have-retirement-benefits-in-2019.htm, October 2019.

The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.

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