Lots of baby boomers are hitting retirement age. And with retirement come some pretty big irrevocable decisions. One of which may be how to elect a pension. Now let me be clear. Not everyone has a pension. In fact, fewer and fewer people do as fewer and fewer companies offer them. But if you do have a pension and have yet to retire, you’ve got some important decisions coming. These decisions are often permanent; so don’t be hasty in signing the documents!
Here are some considerations to weigh in your decision-making:
- Longevity – How’s your health? What’s the history of longevity in your family? This matters.
- Health of pension fund – Just because the company offers a pension doesn’t mean it always will. Are the funds backing this “promise to pay” at least 80% of the obligations?
- Present value calculation – “Which gives me more money over time?” That’s another way of asking how long do you need to live to benefit from monthly installments versus a lump sum benefit?
- Other income – Do you need predictable streams of income? Or do you value flexibility over certainty of income?
- Other assets – Do you have other assets that you can access for lump sum withdrawals when an emergency or opportunity arises?
- Long-term risks – How do you feel about market and inflation risks over time?
Like all other parts of wealth management and financial planning, pension election is an art, not a science. Any time there are assumptions involved there can be no definitive right or wrong. What may be right for one may be wrong for another. So if forced to make a pension election decision, make a plan. Consider all the variables. Prioritize your needs and objectives. Feel free to call us.
We’re here to align your personal values, vision and wealth. Especially when it comes time to make big irrevocable decisions.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
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