Which Job Sectors Offer the Best Retirement Plans?

Not all retirement plans are created equal.

While the fine print of a pension or 401(k) plan can lead to some head scratching, it is clear that there are certain private job sectors that tend to offer employees top-notch retirement benefits.

Experts said employees of the top-tier companies from the energy, financial and pharmaceutical sectors typically land the top-of-the-line retirement benefits.

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It should be no surprise to find the energy sector on that list, as the world’s largest company, ExxonMobil (XOM) and other big-name oil companies continue to rake in profits by the boatload. It’s also proof of the supply and demand in the job market as retirement benefits can help sway potential employees one way or the other.

Excellent retirement plans can be viewed as an incentive “when you are trying to recruit someone to work on an oil rig out on the Gulf of Mexico or be moved continuously around the world looking for oil,” said David Wray, president of Profit Sharing/401k Council of America, a non-profit group based in Chicago.

“Benefits are about retaining, maintaining and motivating your workers. There’s clearly a correlation in the benefit package and the company’s desire to retain people over time along with the level of scarcity of the type of workers you need,” said Wray.

Pharmaceutical giants have also used top-notch retirement plans as a way to hold onto valued employees.
“They are really trying to capitalize on keeping intellectual capital in their firms and on long-term employment. Good retirement plans generally do that,” said Don Fuerst, a retirement consultant for Mercer, a global human resources company.

What’s the difference between a good retirement plan and an excellent one?

Experts said the best benefits not only have 401(k)s with high employer contribution levels, but also solid pension plans. Pension plans are vital because they provide workers with lifetime income.

“It’s a guarantee that people just can’t get in a 401(k) plan,” said Fuerst. For a career employee (30 years of service) 40% of one’s final pay would be considered a very good pension plan, he said.

The best retirement plans have relatively low fees and expenses, along with good investment choices.

“If they don’t have good funds then who cares because you could lose a ton of money,” said Mark Bruno, who wrote the book Save Now or Die Trying: Achieving Long-Term Wealth in Your 20s and 30s.

The amount of weight placed on these retirement plans by prospective employees often varies by age because older employees value benefits more than those just entering the job market. Older workers “are more focused on saving for retirement …Younger employees are looking for cash,” said Wray.

Experts said union jobs still tend to offer strong retirement benefits – but not quite at the same levels as they used to, as companies react to the global economy.

“You can’t make promises that put your corporation at risk and the negotiations have reflected that. The benefits have been altered to fit within the reality,” said Wray.

Automakers have cut back or frozen their pension plans for salaried workers in recent years as high labor costs have hampered profits for General Motors (GM), Ford (F) and Chrysler, the three largest U.S. automakers.

Public sector retirement benefits take the cake.

Federal government positions typically offer the very best retirement plans, including important cost-of-living adjustments. If someone retires at 65, a pension plan with cost of living adjustments is worth 50% more than a regular pension, said Henry Hebeler, author of Getting Started in a Financially Secure Retirement.

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