Pension Or No Pension, Have a Plan for Creating Retirement Income

retirement income planning

Here’s proof that funding retirement has changed: In 1970, 45% of private-sector employees were covered by a pension plan.[1] Now, 4% are covered.[2] Pensions have largely been replaced by 401(k), IRAs, and similar retirement plans, and retirees must find a way to make their savings last throughout retirement. If you are lucky enough to have a pension, you still have important decisions to make as to how you want to receive payments. Pension or no pension, you should have a plan for creating retirement income.

Can You Rely On Your Pension?

Last year, General Electric announced plans to freeze pension benefits for over 20,000 employees and to offer pension buyouts to about 100,000 former employees.[3] This is part of a larger trend in the private sector, where there is no guarantee that companies that originally promised pensions will follow through. If workers do receive their pension, they may have to decide between larger payments over their lifetime, or smaller payments over both their and their spouse’s lifetimes. Or, they could end up facing the decision of taking a lump sum or payments over a long period of time. These are crucial decisions, and the right choice depends on the individual’s situation.

What Today’s Market Means for Public Pensions

As the federal and state governments struggle to pay for COVID-19 expenses and experience less tax revenue, they must contend with their pension debt. A recent report from Moody’s Investors Service found that investment returns have likely fallen short of targets.[4] About 80 cents of every dollar paid to public pensioned retirees comes from investment income[5], so low returns are cause for concern. Governments may increase taxes to make up the difference as many did after the 2008 crash.

The SECURE Act

Americans are living longer and are often spending more time in retirement. The SECURE Act responds to the changing retirement landscape in many ways. Retirement plan sponsors will be required to state the estimated monthly payments that participants would receive if they used their entire account balance to buy an annuity.[6] Your projected monthly income is one important thing to know if you don’t want to leave your retirement income to chance. The law also allows employer-sponsored 401(k) plans to add annuities as an investment option.[7] While annuities can offer guaranteed lifetime income, retirees shouldn’t look for a one size fits all solution.

We can help you decide on the best retirement income option for you, whether you have a pension and are unsure of your payout strategy, or you’re wondering how to turn your retirement account savings into lifetime income. The decisions you make at this time in your life could impact your finances for the rest of your life, so advice from a seasoned professional is key. Sign up for a complimentary review to start discussing your options.

[1] https://www.workforce.com/news/the-history-of-retirement-benefits

[2] https://money.cnn.com/retirement/guide/pensions_basics.moneymag/index7.htm

[3] https://www.usatoday.com/story/money/2019/10/07/ge-pension-freeze-reasons-defined-benefit-plans-are-dead/

[4] https://www.forbes.com/sites/lizfarmer/2020/07/20/stock-market-public-pensions/

[5] https://www.ebri.org/pdf/FFE127.17June09.Final.pdf

[6] https://www.congress.gov/bill/116th-congress/house-bill/1994

[7] https://www.congress.gov/bill/116th-congress/house-bill/1994

The commentary on this blog reflects the personal opinions, viewpoints and analyses of BML Wealth Management’s employees providing such comments, and should not be regarded as a description of advisory services provided by Cooper Financial Group. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.

Investment Advisory services are offered through Cooper Financial Group, an SEC Registered Investment Advisory firm. All Insurance Services are offered through BML Wealth & Insurance Services. California Insurance License #0M15550. BML Wealth Management & Cooper Financial Group are not affiliated.

We do not provide tax or legal advice, all individuals are encouraged to seek guidance from qualified professionals regarding their personal situation. Any references to protection benefits or steady and reliable income streams in this guide refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured. Indices mentioned are unmanaged and cannot be invested into directly.

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