With Southern California Edison’s annual pension rate announcement coming in September, retirement naturally becomes a bigger topic of conversation for employees who may be approaching that decision.
For those who plan to retire within the next few months or even within the next year, this is an important time to bring the pieces together.
Retirement planning is not one decision. It is a series of decisions involving your SCE retirement benefits, pension if applicable, 401(k), Social Security, healthcare, taxes, investment strategy, cash flow, estate planning, and the lifestyle you want to create after work.
The goal is not simply to pick a retirement date. It is to determine whether your financial resources can reasonably support your lifestyle, whether your major benefit decisions have been coordinated, and whether you have enough flexibility to navigate the first several years of retirement with confidence.
For SCE employees nearing retirement, a complete plan should answer three basic questions:
- What will retirement cost?
- Where will the income come from?
- How will the plan respond if life, markets, taxes, or healthcare costs do not go exactly as expected?
Start With Your Retirement Date, But Do Not Let the Date Drive the Entire Plan
Many people begin retirement planning by choosing a date.
That makes sense. A retirement date gives you something specific to work toward.
However, the date should ideally be the result of the planning process rather than the starting assumption.
For example, an employee may initially want to retire at the end of the year because that timing feels convenient. But once pension benefits, healthcare coverage, Social Security, taxes, vacation payouts, 401(k) contributions, and household cash flow are reviewed, another date may prove more practical.
For eligible SCE pension participants, the annual pension rate announcement can also become an important planning factor. Changes in pension rates may influence projected values or benefit calculations, but they should generally be considered alongside the rest of the retirement picture rather than in isolation.
Key Question
If your preferred retirement date changed by three, six, or twelve months, would the financial outcome meaningfully improve?
Understand Which SCE Retirement Benefits Apply to You
One of the first steps is identifying exactly which retirement benefits are available to you.
Not every SCE employee has the same benefit structure.
Depending on your hire date and plan provisions, your retirement resources may include:
- An SCE pension
- An Edison 401(k)
- Employer contributions
- Social Security
- Other personal retirement or investment accounts
For eligible pension participants, understanding the pension means more than simply looking at the current balance.
You may need to evaluate:
- The value of the pension at different retirement dates
- The effect of annual pension rates
- Lump sum versus monthly income options
- Survivor benefit elections
- The role the pension will play within your overall retirement income plan
For employees who do not participate in the pension, retirement planning may rely more heavily on 401(k) assets, Social Security, and personal savings.
Either way, the planning question is the same: How will your available resources work together to support the retirement lifestyle you want?
Determine What Retirement Will Actually Cost
Before deciding whether retirement is attainable, you need a realistic estimate of what life after work may cost.
One common mistake is assuming retirement spending will simply equal a percentage of your current salary.
That may not reflect reality.
Some expenses may decline when you retire. You may no longer commute, contribute to retirement plans, or incur certain employment-related expenses.
Other expenses may rise.
The first several years of retirement are often active years. Travel, recreation, home projects, hobbies, and time with family can increase discretionary spending. Healthcare expenses may also change, particularly for anyone retiring before Medicare eligibility.
It can be helpful to separate retirement expenses into two groups.
Essential Spending
This may include:
- Housing
- Utilities
- Food
- Insurance
- Healthcare
- Transportation
- Taxes
- Basic household expenses
Discretionary Spending
This may include:
- Travel
- Dining
- Entertainment
- Hobbies
- Gifts
- Second homes
- Major purchases
Understanding which expenses are essential and which are flexible can become especially important during periods of market volatility.
Key Question
Do you know approximately how much after-tax income you will need each month to support the retirement lifestyle you are planning?
Build a Retirement Income Plan
Once spending has been estimated, the next step is determining where the money will come from.
For many SCE retirees, income may come from several different sources:
- Pension income
- Social Security
- 401(k) withdrawals
- Traditional IRA distributions
- Roth accounts
- Taxable investments
- Cash reserves
- Other income
Each source has different characteristics.
Pension and Social Security benefits may provide relatively predictable monthly income. Investment accounts provide flexibility but may fluctuate in value. Traditional retirement accounts are generally taxable when distributed, while qualified Roth distributions may receive more favorable tax treatment.
The objective is to coordinate these resources rather than treating each one independently.
For example, if pension and Social Security income cover much of the household’s essential spending, investment accounts may have more flexibility to support discretionary expenses, future inflation, and unexpected needs.
Another retiree may rely much more heavily on portfolio withdrawals from the beginning.
Those two households may require very different investment and retirement income strategies.
Make the Pension Decision in Context
For eligible SCE employees, the pension may represent one of the most significant financial decisions made at retirement.
If both a lump sum and monthly pension option are available, there is no universal answer as to which is better.
The decision may depend on:
- Age
- Health
- Longevity expectations
- Spouse protection
- Other guaranteed income
- Investment experience
- Risk tolerance
- Liquidity needs
- Estate planning goals
- Taxes
- Current pension rates
A monthly pension may provide predictable income and reduce dependence on investment withdrawals.
A lump sum may provide greater flexibility and control, but it also transfers investment and longevity responsibility to the retiree.
The decision should therefore be evaluated within the context of the entire household balance sheet.
Key Question
Is your priority predictable income, flexibility, spouse protection, legacy planning, or some combination of these objectives?
Coordinate Social Security With the Rest of the Plan
Retiring and claiming Social Security do not have to happen at the same time.
Some retirees begin Social Security shortly after leaving work. Others may use pension income, cash, or investments for a period while delaying Social Security.
The appropriate strategy depends on individual circumstances, including:
- Income needs
- Health
- Life expectancy
- Marital status
- Survivor benefits
- Tax considerations
- Other retirement income
For married couples, Social Security decisions may also affect survivor income later in retirement.
Rather than asking only, “When should I claim Social Security?” a better question may be, “How should Social Security fit into my overall retirement income plan?”
Plan for Healthcare Before Your Last Day of Work
Healthcare can be one of the largest and most unpredictable expenses retirees face.
If you plan to retire before Medicare eligibility, it is especially important to understand what coverage will be available and what it may cost.
After Medicare begins, healthcare expenses still remain.
Retirees may need to plan for:
- Medicare premiums
- Supplemental coverage
- Prescription costs
- Dental care
- Vision care
- Hearing expenses
- Out-of-pocket costs
Long-term care should also be considered separately.
An extended need for home care, assisted living, or skilled nursing services can have a significant impact on retirement assets and on the financial security of a spouse.
Key Question
Have you included healthcare and potential long-term care expenses in your retirement projections?
Review Your Investment Strategy Before Retirement Begins
Retirement changes how an investment portfolio is used.
During working years, you are typically adding money to retirement accounts.
After retirement, you may begin withdrawing from them.
That change makes the years immediately before and after retirement particularly important.
A significant market decline shortly after retirement can be more damaging when withdrawals are being taken at the same time. This is known as sequence of returns risk.
That does not mean retirees should eliminate market exposure. A retirement lasting several decades may still require long-term growth to help address inflation.
Instead, the portfolio should be reviewed to determine whether the current allocation still aligns with:
- Retirement income needs
- Risk tolerance
- Time horizon
- Liquidity needs
- Other predictable income sources
A portfolio designed entirely for accumulation may need to evolve as retirement approaches.
Build an Appropriate Cash Reserve
Liquidity can provide valuable flexibility in retirement.
Maintaining sufficient cash or other readily available assets may reduce the need to sell investments during unfavorable market conditions.
The appropriate amount varies by household.
Some retirees may prefer enough reserves to cover several months of expenses. Others may want a larger cushion depending on their income sources, risk tolerance, expected expenses, or investment strategy.
The objective is not to hold excessive cash indefinitely. It is to make sure short-term spending needs do not create unnecessary pressure on long-term investments.
Think About Taxes Before Retirement
Taxes do not disappear when employment income ends.
Instead, the source of taxable income often changes.
Retirement income may come from:
- Pension payments
- 401(k) or IRA distributions
- Social Security
- Investment income
- Capital gains
- Real estate income
The years immediately after retirement may sometimes create planning opportunities, particularly before Required Minimum Distributions begin.
Depending on individual circumstances, retirees may evaluate:
- Roth conversions
- Withdrawal sequencing
- Charitable strategies
- Capital gains management
- State residency
- Medicare income-related premium thresholds
The objective should generally not be to minimize taxes in one particular year.
A more useful approach may be to consider taxes over the course of retirement.
Key Question
Are you thinking about taxes year by year, or are you considering how today’s decisions may affect taxes later in retirement?
Review Your Estate Plan and Beneficiaries
Retirement is also an appropriate time to review estate planning documents.
Over time, families change. Assets change. Laws change.
Consider reviewing:
- Wills
- Trusts
- Financial powers of attorney
- Healthcare directives
- Beneficiary designations
- Account ownership
- Insurance policies
Beneficiary designations on retirement accounts and insurance policies are particularly important because they may control how those assets transfer at death.
Estate planning should not be treated as something separate from retirement planning. It is another part of making sure the financial plan continues to work if circumstances change.
Prepare for the Emotional Transition
One of the most overlooked parts of retirement planning has nothing to do with money.
For someone who has worked at Southern California Edison for decades, work may represent structure, friendships, purpose, identity, and routine.
Retirement changes all of that very quickly.
The first several months may feel like an extended vacation. Eventually, however, retirement becomes everyday life.
It is worth thinking about:
- How you want to spend your time
- Whether you want to travel
- Volunteering or community involvement
- Hobbies
- Exercise and health
- Relationships
- Part-time work or consulting
- Time with family
Couples should also discuss their expectations.
Two people who previously spent much of the week apart may suddenly be together significantly more often. Retirement can change household routines, spending patterns, and even how each person defines personal time.
Key Question
What are you retiring to, not simply what are you retiring from?
Use the Final Year Before Retirement Intentionally
If retirement is within the next twelve months, this is the time to begin converting the plan from theory into action.
During that year, consider:
- Confirming pension and retirement benefit estimates
- Reviewing Social Security options
- Estimating retirement spending
- Evaluating healthcare coverage
- Reviewing investment allocation
- Building liquidity
- Paying down or restructuring debt
- Considering major home repairs or purchases
- Reviewing taxes
- Updating estate planning documents
- Confirming beneficiary designations
- Discussing retirement expectations with your spouse
- Identifying how you want to spend your time
This final year can also be a useful opportunity to test your retirement budget.
If you believe you will live on a certain amount each month after retirement, consider whether your current household spending is consistent with that assumption.
It is easier to adjust the plan while you are still working than after your paycheck has stopped.
Your First Year of Retirement Is Part of the Plan
Retirement planning should continue after retirement begins.
The first year provides real-world information that no financial projection can perfectly predict.
You begin to learn:
- What you actually spend
- How much you travel
- How healthcare costs compare with expectations
- How comfortable you are withdrawing from investments
- Whether your cash reserves feel appropriate
- Whether your investment strategy still fits
- Whether your retirement lifestyle matches what you imagined
This is also an important time to evaluate tax planning and withdrawal strategies.
Rather than treating the retirement date as the finish line, consider the first year or two as another phase of the planning process.
Common Retirement Planning Mistakes
Choosing a Retirement Date Before Running the Numbers
A preferred date is helpful, but benefits, taxes, healthcare, and cash flow should be evaluated before the decision becomes final.
Focusing Only on the Pension
For eligible employees, the pension may be a major asset, but it is only one component of retirement.
Assuming Current Spending Will Continue Forever
Retirement spending may be higher in some years and lower in others. Healthcare and travel can change significantly over time.
Ignoring Market Risk Around Retirement
The years immediately before and after retirement can be especially important because withdrawals may begin while markets are volatile.
Claiming Social Security Without Coordinating It
Social Security should generally be considered alongside pension income, investments, taxes, and survivor needs.
Underestimating Healthcare
Healthcare can materially change the retirement budget, particularly before Medicare.
Ignoring Taxes Until After Retirement
Some tax decisions may benefit from planning before employment income ends.
Planning Financially but Not Personally
Having sufficient financial resources does not automatically create a fulfilling retirement.
The Complete SCE Retirement Checklist
If retirement is within the next several months or year, consider whether you have:
- Identified the retirement date you are considering
- Confirmed which SCE retirement benefits apply to you
- Reviewed pension options if eligible
- Estimated your retirement spending
- Identified your sources of retirement income
- Evaluated your Social Security strategy
- Planned for healthcare and Medicare
- Considered long-term care
- Reviewed your investment allocation
- Established appropriate cash reserves
- Evaluated taxes and potential Roth conversions
- Reviewed your estate plan
- Confirmed beneficiary designations
- Considered debt and major upcoming expenses
- Stress-tested your plan for inflation and market declines
- Discussed retirement expectations with your spouse or family
- Developed a plan for how you want to spend your time
- Established a process for reviewing the plan after retirement begins
You do not need complete certainty before retiring.
The objective is to understand the major decisions, know how the pieces work together, and build enough flexibility into the plan to adjust when circumstances change.
Key Takeaways
Retirement planning for Southern California Edison employees involves much more than selecting a retirement date.
For eligible employees, the annual pension rate announcement may be an important planning consideration. However, pension decisions should generally be evaluated alongside the 401(k), Social Security, healthcare, taxes, investments, and overall household income needs.
The final year before retirement can be particularly valuable for testing assumptions, confirming benefits, building liquidity, reviewing investments, and coordinating tax and healthcare decisions.
The first year after retirement is equally important. Actual spending, investment withdrawals, healthcare expenses, and lifestyle decisions may differ from projections, making ongoing review essential.
Most importantly, retirement readiness includes both financial and personal preparation.
Frequently Asked Questions
What should SCE employees do one year before retirement?
Employees approaching retirement may benefit from reviewing SCE benefits, pension options if applicable, Social Security, healthcare, retirement spending, investments, taxes, estate planning, and cash reserves.
How do I know if I have enough money to retire?
Retirement readiness generally involves comparing projected spending with pension income, Social Security, retirement accounts, and other resources while considering taxes, inflation, market volatility, healthcare, and longevity.
Should I wait for the SCE pension rate announcement before retiring?
For eligible pension participants, pension rates may be an important consideration. However, retirement timing should generally be evaluated using the entire financial picture rather than one benefit calculation.
Should I take the SCE pension as a lump sum or monthly income?
There is no universal answer. The decision depends on income needs, longevity, spouse protection, liquidity, investment experience, risk tolerance, taxes, and estate planning objectives.
When should I claim Social Security?
The appropriate timing depends on individual circumstances, including income needs, health, marital status, longevity expectations, taxes, and other retirement resources.
How much cash should I have when I retire?
The appropriate amount varies by individual circumstances. Maintaining sufficient liquidity may help cover near-term expenses and reduce the need to sell investments during market declines.
What should I review after I retire?
Retirees may want to review actual spending, investment withdrawals, taxes, healthcare expenses, portfolio allocation, cash reserves, and whether their retirement lifestyle aligns with expectations.
Final Thoughts
With the annual SCE pension rate announcement arriving each September, it is natural for employees approaching retirement to focus on what the new rate may mean for their benefits.
But retirement is much bigger than one rate, one account, or one decision.
A complete retirement plan brings together your SCE benefits, pension if applicable, 401(k), Social Security, investments, healthcare, taxes, estate plan, and expected spending. It also considers how you want to live once your career ends.
At Guardian Financial Partners, we believe the goal of retirement planning is not simply to determine whether you can stop working. It is to help you understand how your financial resources can work together so that you can approach retirement with greater clarity and confidence.
For SCE employees who expect to retire within the next several months or year, now can be an important time to organize those decisions, test the plan, and prepare for the transition ahead.
Thoughtful planning can help you make informed decisions designed to preserve your assets and protect your lifestyle.
About the Author
Casey S. Bartels, CFP® is a Founding Partner of Guardian Financial Partners. Since 2007, Casey and his partners have worked with Southern California Edison employees and executives, helping them navigate retirement planning, pension decisions, and other important financial considerations.
Educating Edison is our educational series designed to help Southern California Edison employees better navigate their financial lives.
Guardian Financial Partners is a Registered Investment Adviser. Guardian Financial Partners is not affiliated with, endorsed by, or sponsored by Southern California Edison. The content presented in the Educating Edison series is for educational purposes only and is not intended as individualized investment, tax, or legal advice. Plan provisions, eligibility requirements, pension calculations, tax laws, and retirement benefits may change and can vary by individual. Individuals should review current plan documents and consult appropriate financial, tax, and legal professionals regarding their specific circumstances.
