A Wealth of Advice: Retirement Tips for Oil, Gas Workers

A Wealth of Advice: Retirement Tips for Oil, Gas Workers
Merrill Lynch financial expert Pat Wenzel offers retirement advice for oil and gas workers.

Many would argue it’s never too early to start saving. However, there is a time when it’s too late to begin saving, most likely when you find yourself near retirement with no real plan or a sufficient amount of money.

With the uncertainty of an oil and gas market that is still grappling with low oil prices, financial planning is even more important for industry workers. Even those who have been saving already may need to make adjustments to account for the present downturn and the possibility of another year with a challenging market.

Pat Wenzel
Pat Wenzel, Managing Director – Wealth Management, Merrill Lynch
Wealth Management, Merrill Lynch

Pat Wenzel, wealth management advisor for Merrill Lynch, has nearly 25 years of experience in the financial industry. Wenzel and her 12-person team focus primarily on retirement planning and advice. As Wenzel puts it, “it’s what we do, what we love to do and our true specialty.” Her team manages $3 billion in assets, of which about two-thirds are from the energy and energy services companies and their employees or former employees.

Wenzel had a candid chat with Rigzone as she shared her expertise about real financial issues facing oil and gas workers today.  

Financial Concerns – Then and Now

The oil and gas industry started seeing a steep drop in crude prices in the latter part of 2014. At the time, many oil and gas employees – namely baby boomers – were offered voluntary severance packages in hopes that they would opt to retire.

Though the industry has seen its ups and downs, this downturn was said to be unique because of its suddenness and severity. And frankly, people just weren’t prepared.

“Most of those who were affected were in their sixties, and so many were completely unprepared,” Wenzel told Rigzone. “It was a surprise to them.”

Common questions were, “what are the next steps?” “what’s my plan B?” and “where do I go from here?”

“The biggest concern for those individuals was uncertainty on whether or not they realistically could retire,” said Wenzel. “Many had been working 30 to 40 years, were in their sixties and had money set aside in their 401K plan. They were hoping that if they were unable to find another job, they could retire.”

However, many of those individuals found that the sudden downturn was a “sad and eye-opening experience,” said Wenzel. Even though they thought they had saved enough money, it wasn’t sufficient for the remainder of their lives.

Some simply waited too late to begin saving.

“Proper planning well ahead of your retirement age is important,” said Wenzel. “2015 is different. Now people are being laid off, not in their sixties, but much younger. These are the engineers that were hard to get two to three years ago – the skilled laborers in their thirties, forties and fifties.”

Regardless of their situation, education or income, Wenzel noted the common trend is that many workers are ill-prepared for a catastrophic situation.       

     

Company Stocks and Diversification

According to Wenzel, a mistake many oil and gas workers make is becoming “married” to their company stock.

“In the energy sector, we’ve seen how a company stock price can go down to 50 percent or more in the matter of a year,” she said. “During the time of the BP oil spill, for example, there were many BP employees and former employees living off that BP stock. It becomes a little too risky to rely on one company for your retirement future. While it’s okay to choose to invest in your company stock, typically no more than 10 to 20 percent of your overall investable assets should be in your company stock.”

Wenzel said she and her team preach the importance of portfolio diversification because anything can happen to any company at any time.

She said the first step in diversification is for individuals to understand their financial goals with their money, and that’s best determined by working with a financial professional.

“Most people don’t understand asset allocation – stocks, bonds, cash, etc. – basically, how my money should be divvied up,” she said. “How much risk am I willing to take?”

Generally, the younger somebody is, the further out it will be before they are going to need to touch the money, Wenzel noted. This helps determine how aggressive they can be with their assets.

It’s understandable for people to invest in what they know, but Wenzel said diversification is key, specifically in the final 10 years prior to retirement.

Taking a Realistic Approach to Budgeting and Spending

An important first step in financial planning is creating a realistic budget. Wenzel said her team practices a goals-based approach with millennials in which they actually sit down and prepare a budget.

“Most people have no idea where their money goes,” said Wenzel. “We help them understand how much they spend per month. This includes taking a real look at mortgage, utility bills, insurance premiums and fun money, such as dinners and vacations.”

Wenzel encourages people to have three times their basic monthly living expenses saved in a savings account.

“These days, savings accounts are not really earning anything, but that’s not the point,” she said, “you’re going to need that money saved.”

A Wealth of Advice: Retirement Tips for Oil, Gas Workers

This emergency fund can help bridge the gap between unemployment and the next job opportunity, but it isn’t purposed just in case of layoffs, but other unexpected things, such as accidents or disabilities, Wenzel said.

“It’s during those times when you won’t want to get yourself in a liability situation – such as borrowing money from your 401K and getting doubly taxed or running up credit card debt,” she said. “You don’t want short-term needs to get in the way of long-term goals. That’s why you need the emergency fund.”

When it comes to savings practices for millennials, they fare a little better than their baby boomer counterparts.    

“Even though baby boomers are becoming better savers than years ago, they’re still not good savers,” said Wenzel.

On a recent visit to Washington, D.C., Wenzel said she learned the average 65-year-old retiree has $150,000 saved.

“If you need $30,000 a year to live, you are looking at just five years of maintaining,” she said. “People are living longer these days and baby boomers are unrealistic as to what it is going to take to retire.”

Wenzel said though some oil and gas companies still provide pensions, it’s few and far between for those who entered the industry in the 1990s and later.

“For those of us 50 years old and younger, it’s completely up to us to save for retirement and many people don’t understand that,” she said. “Often times, it’s not until people are in their forties that they start to really plan for retirement. People are seeing their own parents in their sixties, seventies and eighties who are struggling.”

That’s all the more reason to take the initiative at a young age and begin financial planning – downturn or not – to improve one’s future quality of life. 



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Kendall Capital  |  December 10, 2017
One more thing you can add. In wealth management the wealth managers, the client’s long-range financial goals and needs, as determined by an informed and up-to-date client profile, lead to the choice of products. And Wealth managers can deliver so many products and services. Kendall Capital
keith kappel  |  August 21, 2015
Liked the information, could use more. I am 57 worked in oil 30+ years and now find my self unemployed?


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