Health insurance. Retiree medical coverage is not insured by the government and is often eliminated by financially struggling companies or during bankruptcy proceedings. "There is basically no protection for retiree health benefits," says Joseph Matthews, an attorney specializing in senior issues and author of Social Security, Medicare & Government Pensions. "You've got to be aware that at any moment you could lose your retiree health benefits." Xerox, for example, announced a cut in medical benefits for some former employees over the age of 65 last year. When asked about the retiree benefit cuts at the company's annual shareholders' meeting in May, recently retired CEO Anne Mulcahy responded, "This was intended to be something that was not going to be a benefit that, you know, was an entitlement forever. It was subject to business conditions. It was subject to management discretion."
401(k) diversification. Employees already own their 401(k) contributions and any employer contributions that have been vested. But the value of company stock in your 401(k) is linked to the health of the company. To protect your retirement security, it's a good idea to diversify beyond company stock. For the most part, employees have already been doing this. Only 9 percent of employees held half or more of their 401(k) plan assets in their employer's stock in 2008, down from 16 percent in 2007 and 27 percent in 2004, according to a Hewitt Associates analysis. Heed the warnings of former Enron employees, some of whom were heavily invested in company stock and saw their retirement savings disintegrate overnight when the company collapsed, and don't put your entire nest egg in one company—even your own.