In tough economic times, it can be encouraging to see companies cutting their costs. But when those cuts include retirement benefits, employees and investors can ultimately suffer.

Some industries are paring back their retirement benefit spending more than others. Towers Watson tracked benefits across various sectors, including traditional pensions, 401(k) plans, and medical and life insurance plans for retirees:


Percentage of Pay Spent on Retirement Benefits, 2008

Change from 1998

Retail and wholesale






Energy, natural resources, gas, electric






High tech



Financial services



Health care






Data: Towers Watson.

You'll notice that on average, different industries spend vastly different proportions of pay on retirement benefits. While the energy industry's spending has shrunk by 24% since 1998, it's still spending a healthy 9.23% of pay on its workers' future nest eggs. Meanwhile, the services industry increased spending by 3%. But proportionally speaking, it's still one of the least generous places for retirement benefits, spending half as much as the financial-services sector, and 33% less than the health-care business.

A recent U.S. News and World Report article noted that many of those reductions owe to the dwindling value of traditional pension plans, which was significant enough to outweigh increases in 401(k) matching contributions. Companies that have frozen their pension plans include Qwest Communications (NYSE: Q) and Boeing (NYSE: BA). Boeing will offer those hired in 2011 and after an "enhanced" 401(k) plan, but no pension. Beginning this year, Qwest will stop accruing pension benefits for non-union workers.

Wherever possible, workers should seek employment in businesses that provide strong benefits for retirement, and stay aware of the potential for cuts in those benefits. Investors should beware the morale- and productivity-sapping effect of benefit cuts at their companies; if disgruntled workers jump ship for better treatment elsewhere, replacing them can get costly.

Companies doing retirement right
On the flipside, the expense a company incurs for paying generous benefits is often offset, if not eclipsed, by the benefits of attracting and retaining good workers. These above-average companies know how to treat their employees well:

  • Qualcomm (Nasdaq: QCOM): Ranked 9th on Fortune's annual list of the 100 best companies to work for, the wireless industry's prince of patents offers stock options to employees upon hire. Stock options alone can't guarantee a healthy retirement, but they can lead to rich rewards if the company does well.
  • Chesapeake Energy (NYSE: CHK): Workers here get 100% company 401(k) matches up to 15% of salary (the average is 50% of contributions up to 6%), and regular stock grants. The matches generally come in the form of company stock, though, leaving workers at risk of putting too many retirement eggs in a single basket.
  • Cisco Systems (Nasdaq: CSCO): According to the folks at, Cisco's 401(k) features "great" company generosity and low fees. The company matches 401(k) contributions up to 4.5% of salary.
  • UPS (NYSE: UPS): The delivery giant offers profit-sharing up to 12% of workers' salary.
  • Amgen (Nasdaq: AMGN): The big biotech outfit sports a 401(k) featuring a "core contribution" of 5%, as well as a company matching contribution of 100% of staff contributions up to 5% of eligible pay.

These companies' generosity could bode well for their performance. When you're looking for great companies to populate your portfolio, give extra attention to those with appealing benefits.

Your retirement will stink -- unless you take steps to salvage it.