Understanding what funds your retirement
The retirement landscape has changed in the last few decades. In the past, many private and public sector employees, from teachers to engineers, had access to defined-benefit pension plans where, after years and years of service to a company, their company would fund a comfortable retirement for employees until their deaths or their spouses’ deaths. Pension plan management was done by professional investment managers and the company assumed all the risk of their investment advisors’ management decisions, including funding any shortfall.
In the present day, many of our clients who are at retirement age don’t have access to full pensions. They do have Social Security benefits, a type of pension benefit,, but those are rarely enough to cover their entire cost of living. Instead, they are responsible for their own retirement. They save for it through defined-contribution plans, which include 401ks and 403bs.
If you do have access to a pension, it may not fund your entire retirement. Instead, it may be an important stream of income that needs to be managed by a financial advisor who can coordinate all of the assets in your retirement portfolio. At RIS, that’s exactly what our comprehensive approach to financial planning allows us to do.
Lump sum analysis
Some employers offer their retiring employees the option to receive one lump sum payment instead of smaller monthly pension benefits. Could that be right for you? Well, it depends on current market conditions, including expected return and the rate of inflation, your projected longevity, your standard of living, and other factors. We can help you analyze your options and the risks associated with each to make the best decision for your family.
Creating pension-like benefits through income distribution
Whether you have a pension that can provide for 100% of your income in retirement or not, the pension payment structure is a good one to emulate. Pension beneficiaries receive regular distributions, creating a smooth transition as they leave the work world and retire. They go from regular paychecks to regular pension payments that continue until their death. In comparison, 401k, 403b, and IRA investors have access to the entirety of their retirement savings penalty free at age 59 1/2. It can be daunting to say good-bye to the paycheck you have been earning for many decades and realize you have this pot of money to last you the rest of your life.
An RIS financial advisor can help you create ongoing income streams and an income distribution plan for you and your family in retirement through a range of retirement savings accounts, Social Security benefits, and investment returns.
Set up a free consultation today to tell us more about your retirement situation and financial goals and see how we can help.