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Blog May 31, 2022

How TX Energy Can Affect your Retirement Plans

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If you live in Texas, you may be surprised that your retirement plan is impacted by the Texas energy industry. Because the Lone Star State is the nation’s largest energy producer, state leaders passed a bill last year (Senate Bill 13) to stop public retirement funds from doing business with financial companies who ban traditional fossil fuel companies (coal, crude oil, and natural gas). Leaders wanted to send a message to companies that do business in Texas that the state is proud of its energy-rich resources.

As climate change incentives and advocacy increase, plus political pressure, many investment companies are rushing to the renewable energy bandwagon before a cost-efficient infrastructure is established. Texas is also the largest exporter of renewable wind energy; however the scope of available wind power is not as established or currently wide-reaching as traditional energy sources.

What does this all mean for Texas public employees and Texans with private retirement investments? Read more.

 

Texas’s Unique Power Grid

In the 1940s, Texas established its own power grid in order to keep oversight at the state level. Most of the United States runs off only two power grids (Eastern and Western US Interconnections), but Texas runs its own grid, the Electric Reliability Council of Texas (ERCOT) Connection, in a deregulated energy market.

Because the state is such a large producer of gas and oil, Texans pay affordable rates for electricity in cost per kilowatt-hour, ranking ninth in low energy costs for all sectors (residential, industrial, commercial, and transportation rates). But Texas also ranks sixth in residential energy consumption per household, likely due to the state’s warmer climate.

 

Texas Teacher & Public Employee Retirement Plans

Gas, oil, and renewable energy companies (like solar and wind) are all important commodities related to investment funds.

Texas teachers invest 7.5% of their income into a pension fund, while state employees are required to invest 9.5% to their retirement fund. With Senate Bill 13, retirement companies who deliberately refuse to invest in oil and gas will not receive any pension fund money. While teacher retirement funds don’t go directly to energy companies, they rely on companies who do invest in the commodities. The health of public employees’ retirement outlook is, in turn, impacted by the health of the Texas fossil fuel industry. 

Additionally, tax dollars from oil and gas also help bolster the state’s Economic Stabilization Fund (ESF), aka the “rainy day fund.” Teachers and state employees have benefitted from the fund when regular budget dollars can’t cover promised retirement benefits or to prevent cuts like teacher or public employee layoffs.

 

Non-Public Employee Retirement Plans

According to a Tax Policy Center report, retirement funds are the largest piece of American-owned investments at 30% of the stock market. Both fossil fuels and renewable energy are big factors in investment funds. Ensuring the health of diverse energy companies, including gas and oil, helps shore up retirement funds in the long run.

Many Texas oil companies are also investing in renewable energy resources (like wind or solar) in addition to fossil fuels. As Texans look to retire, investors need to be aware of energy market trends of both renewable and traditional sources. 

Another impact on an individual’s retirement outlook is the shifting of spending for retirees. Spending typically trends downward after retirement age, especially in the areas of saving for retirement (you start drawing from your investments instead of adding to them), taxes, housing (if a mortgage is paid off), food, and lifestyle costs. Of course, some costs will increase, such as travel (for retirees who have the resources and free time to do so) and health care. While retirees may be covered by Medicare plus private insurance plans, health care needs often increase as you age. 

Finally, the cost of powering your home will still impact your budget after you retire. In the last 10 years, U.S. costs have increased 14% and some project an 18% increase by 2040. These projections include the impact of renewable resource-powered electricity. 

 

Affordable, Flexible Prepaid Electricity Plans

With Payless Power, you can start saving now with a flexible electricity plan, including our no deposit prepaid plans. Many of our plans require no credit check and short-term contracts up to 12 months that don’t trap you into a long-term plan that’s not right for your household energy needs. Plus, you receive updates when your balance is low and you can easily add funds through the app, online, phone, or in person.

Discover a Payless Power electricity plan that will help you save money now and save more for your retirement years.

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