The Do's and Don't of pensions for retirement.  Step 1, think ahead.

The Do’s and Don’ts of pensions for retirement.  Step 1, think ahead.

If you are fortunate enough to have a pension, then congratulations to you! You are now assured of a fixed monthly income after your retirement.

While your pension can help you live well as you grow old, you will have regrets if you do not take care of it while it is just in the beginning phases. So if you want to outlive your savings before it outlives you, then here are some Do’s and Don’ts that can help you make the most out of your retirement pension:

Do’s:

  • Start saving while it is still early!  As soon as you are granted an employer’s pension, the first thing you should do is to save up right away!  The earlier you act on this, the bigger your funds will be when you get old.  Add to that, you can make ‘lesser contributions’ every month since you are a long way ahead.
  • Learn more about your pension’s charges and fees.  It will not hurt to ask your employer about what you have to pay initially and annually, to get an idea of how much you need to take off from your monthly living budget.
  • Make additional voluntary contributions (AVC), if warranted.  Ask your employer if the company offers AVCs so you can boost your retirement savings while you still can! This is also advisable for individuals who have started up late on a pension plan (50 years of age and above.)
  • Monitor your pension.  It is not enough that you just dedicate money to your pension fund. Check the performance of your savings every now and then.  Make sure to ask for valuations if you are not receiving any.
  • Apply for Social Security benefits at least three months before the date you wish to receive your welfare.  After all, it’s best to apply for this before you retire from your job, since you have to submit several documents in order to make your claim.
Don't gamble with your pension.  Don't take a lump sum payment without doing the calculations as to whether you are better off

Don’t gamble with your pension. Don’t take a lump sum payment without doing the calculations as to whether you are better off

Don’ts:

  • Don’t be shy to ask questions.  Are some words and jargon highly confusing?  Do not pass up on the opportunity to ask your employer about this.  If not, you might end up signing contracts and clauses that will hurt your financial health.
  • Don’t forget your old pension plans.  If you have pension savings from your former job/s, then make it a point your previous company’s pension employer.  Ask him about the value of your savings, and if you can transfer it to your new company’s pension offer.
  • Don’t gamble with your pension.  It is yours and if treated wisely can help provide for you your entire life.
  • Don’t take a lump sum payment in lieu of your pension unless you understand the assumptions that they are providing you and that you have done the math to make sure it’s fair.

A pension can help you live a comfortable life if you nurture it and use it wisely.  So make sure to follow these tips to avoid any regrets n the future!

Have you been a good steward of your pension?  Did you take an early retirement or a lump sum payment?  How has that worked out for you?  Best thing you ever did or horrible mistake?  Let us know if the comments below!

 

 

3 Responses to The Do’s and Don’ts of Retirement Pensions

  1. I made the mistake of taking a lump sum payout from my retirement account that would have been worth over 500k once I had reached 60 years old. It is advisable to exhaust each and every financial option you have before making an irreversible (and regrettable) retirement account lump sum withdrawal.

    • pradmin says:

      I’m sorry to hear that! There are a few reasons to take a lump sum payment that I could think of, but you really do need to think about if you are better off and read all the fine print. Hopefully your lump sum has been invested safely over the last few years. If you don’t mind me asking, what terms was your pension at before the lump sum?

      • It was one of the best around. I had a guarantee of 7% annual return on my deposits and a structured payout when my age plus the time I worked at my job equaled 75. The name of the retirement plan is called Texas County and District Retirement System (TCDRS) and according to what I have read is in the top 10% of all similar retirement plans in the nation. It is only a distant memory for me now.