No one wants to hear you complain about putting your pension to work for you. Really; it’s like complaining that someone accidentally got dirt on the floor of your brand new Lamborghini because she did not wipe off the bottom of her 6-inch diamond-studded Christian Louboutin heels when you went to George Clooney’s house for a cocktail party and dinner with the Pope, Mother Theresa and Jesus to discuss volunteering your time to help the homeless children of the world build homes in which they can live as they attend college free of charge to become doctors and nurses and educators.
It’s just not a real problem. Okay; it’s a first world problem. And it’s not a first world problem many people have. I don’t have a pension. My husband certainly does not have a pension. My parents don’t even have pensions. Come to think of it, I’m not certain anyone I know has an actual pension.
Wait. Do you even know what a pension is? That’s a good question, honestly. It’s such a statement to make to not get into what it actually is. I’ve heard of it on television and in the movies. It’s that thing people talk about. Fictional characters get to retire from years and years (30+ or something like that) of working for the same company and they’re given a Rolex and something called a pension. It’s a check they receive each month for the rest of their life from their employer. Well, from a retirement fund their employer contributed to for that employee.
Yeah; we don’t have pensions. You see, the problem is that more and more employers recognize the expense of paying out a pension, and fewer and fewer employees actually take the initiative to stick with a company for long periods of time. I red recently than the average American employee spends just over four years with a company before moving on. Granted, I live somewhere in which people spend their entire lives working for the same company, the same people and doing the same thing. They work for the same hospital, they open their own law or medical practices or they teach in the same educational system their entire lives. Not even kidding; my mom has been with the same school for more than 30 years. My aunt has been teaching at the same school for 15 years. My best friend has taught in the same county for 10 years. My husband has been with the same company for 14 years. Where we come from; loyalty is rewarded.
However, that’s not how it works everywhere else. Many people are not in it for the long haul so much as they are in it for the benefits and how things benefit them – and there is not a thing wrong with that. Essentially, it makes no sense for employers to offer a pension to those who aren’t even going to bother sticking around for very long in the first place. Today, only around 18% of workers have a defined-benefit pension. On that same note, fewer than a quarter of the Fortune 500 companies of the world are even offering pensions anymore. It’s just not something that many people have and, therefore, it is not something that many people want to hear you talk about. They don’t have one, they don’t care that you do and hearing you complain about how to use it, build it or make it work for you is just not a real world problem. I mean, it’s just not.
However, that doesn’t mean you don’t care about your pension; and you should care about your pension. We have decided that there are a few things you can do to make your pension work well for you, and you should know what those are. You should know how to best benefit from this money that is being offered to you for your loyalty. You might look at your pension, if you have one, as something that you will benefit from in general, but there are some very amazing ways you can make your pension work for you in a way that you did not even know existed. Here’s how to go ahead and make that pension work for you.
Buy a House
Did you know, and I’m not even kidding, you can get a lower mortgage interest rate on a home when you have a pension? If you’re looking at retiring and moving the tropics (and please allow me to suggest that you do not move to Florida; as a lifelong Floridian, it’s just too hot. Take it to the Carolinas. You’ll get more seasonal weather, it’s not too cold during the winter but it’s also not 90 degrees on Christmas Day), you can buy a new home and get a much better interest rate on it.
Admittedly, you should hopefully have no mortgage on your current home since you should spend your working years working on that mortgage so you can be mortgage free. Sell that house, take the money from it and buy a new one. However, if you are going to mortgage a new house, you’ll get a much lower rate doing so thanks to that pension. Why? It’s income that will never go away, so banks favorably view it as a way for their borrowers to always have the financial means to make those mortgage payments. And there you go; you will get a nice house, a lower rate and a lot more happiness out of your retirement home thanks to your pension.
Here’s a thought; if you have a traditional pension, make that your income and use that for your living expenses. Use that money in retirement to pay for the things you pay for every single day, regardless. Now, take that money from your 401k and other investments and use it for fun. Use it to travel the world. Use it to go see your grandkids on a regular basis. Use it to do what you want to do. These are your golden years; the years you get to enjoy your life and do things your own way. You worked very hard to make it to this point in your life, so take advantage of that. Use your investments and your retirement to thoroughly enjoy your life, and do whatever else you can to have fun, live in the moment and make all those working years worth it.
Invest More Aggressively
At my age, it’s all right for my husband and me to invest a bit more aggressively. Why? Because we are still young enough that our investments have time to bounce back before retirement. When the economy collapsed back in 2008, we weren’t worried about our retirement and our investments. Why? Because we were 25 and had plenty of time to recover. However, when you are already close to retirement age, it’s difficult for you to want to invest more aggressively because losing that money can have a very negative effect on your retirement.
With a pension, you have guaranteed income that allows you to take more risks with your investments. We aren’t saying to be stupid or careless with your investments, but we are saying that you can take up your advisor on his suggestions that you invest a bit more aggressively in certain stocks and index funds. It’s a chance not everyone is able to make with their retirement savings, but it is one you can take with a pension that has the potential to pay off significantly in the long run.
Take the Lifetime Payout
There are two choices that you are given when you leave your job and you are offered your pension. You can take a lump sum value of your pension right now, or you can have monthly payments given to you for the rest of your life. You can do whatever you want, but I’d advise you take the payouts. For one, you will not spend it all at the drop of a hat. If you have a history of poor money management skills, you don’t want that lump sum. Let’s say you have a pension offer of $600,000 in lump sum payment form right now or $4,000 per month for the rest of your life. For one, you might live a lot longer than you think and that $4,000 per month could end up being far more than the lump sum as time wears on.
Secondly, you also have to consider the fact that you will always have income. No matter what happens, you will always have that income. That’s a nice way to live comfortably and without any stress in your life. No matter what, you always have that money coming in on the same day every single month.
Take the Lump Sum
Of course, you could also take the lump sum. Perhaps you’d like to purchase a home and pay cash so you have no expenses other than cell phones, medical insurance and Netflix every month. There is nothing wrong with that. Additionally, you might take the lump sum if you are sick, not expected to live long and want to provide for your family. You can take the lump sum just because you want to take it. It’s up to you, and you can make it work either way. While I, personally, would opt for the monthly payments, I think that there are many instances in which the lump sum is the best choice for someone and their particular version of life. You have to sit down, really think about what you want and make the decision from that point. I can’t tell you which decision is right for you; I can only tell you how you can use the money you have been given from your pension to make it work most beneficially in your life – to an extent.
Opt for the Joint Coverage
Did you know you have a choice with your pension? You can choose to take a single life payment or a joint-and-survivor payment. If you are married, this is a choice you have to make together. It works like this; you get more if you take a single life payment but if you die, your spouse gets nothing. However, if you have a joint-and-survivor payment, your spouse will continue to collect your pension payments for life long after you have passed away. This is not something you even have to worry about if you are unmarried or widowed, but it is something you have to worry about if you have a spouse.
By law, your spouse has to sign off on your choice to take the single life payment. However, it’s probably a very good idea to get the joint coverage. Let’s take this as an example; you are married but your wife has a very serious health condition while you are healthy as a horse. You expect to outlive her, unfortunately, for many years. So, the two of you opt for the single life payment since it’s more money in your pockets each month to help cover the cost of her health condition until she is no longer with you. However, you die first. Now your spouse is left, sick and unable to care for herself, without any money from your pension. It is always a gamble, but it is also one not worth taking if you are married.
Pay Off Debts
One thing that financial experts tell us time and time again is not to go into retirement with debt. It’s a difficult road to navigate, especially since it’s such a dangerous one. When you retire, you typically live on a fixed income. You have no idea what your retirement accounts might look like when it’s time to retire, and that is dangerous. You can hope for the best, but you cannot guarantee the best. You can simply hope that you make a lot money in your investments and that they go a long way toward helping you when you are no longer working.
One good idea if you retire with debt is go take the lump sum pension payout and pay off those debts. It’s probably not at all how you want to use that money, but would you rather take the lump sum and pay off all that you owe so that you no longer live in debt, or take that income as a monthly payout and allot it toward your debt payments? Neither option sounds great, but the feeling of no longer living in debt is one that very likely takes you to a better financial place.
Take a Risk
Now that you’ve retired from your job, perhaps it’s time to do what you really wanted to do your entire life. Perhaps it is time to start that business that you’ve always wanted to start. You can do it with your pension behind you. No, we are not recommending you pay for your business with your pension. We are recommending that you comfortably take the leap of faith and do it since you have your pension behind you to fall back on should your business not work out for you.
We aren’t saying that it’s going to fail, only that so many businesses do. When that happens, most people are left with the issue that they are unable to afford their own lives since their income is gone along with their business. For you, however, you can take that money and use it to live on if your business fails. It is your absolute Plan B and perfect role to help you feel more comfortable taking other risks. So, if you really want to open that little antique shop or that salon, go for it. You can afford to do it knowing that if it fails, you have money.
However, do not use that as an excuse not to work hard to make your business succeed. Too often it takes feeling as if you are backed into a corner with no choice but to make it work to actually make it work, and that’s how we want you to feel with a new business. We don’t want you to feel as if you have something to fall back on so that you’re left feeling a bit ambivalent toward your business success. Take a risk, but do it wisely.
Now that you have a pension and you have all that guaranteed money each month, why not invest it? You can do this with ease so that you can make more money from the money you’re already receiving. For those who have a pension and additional retirement income who can afford to live a comfortable life as well as invest a bit of money, you can do it. Talk to your financial advisor about this, of course. It’s not a wise idea to invest a lot of your pension if you’re not aware of what it is you are doing, so you want to be sure you are working with someone who is aware of what they are doing so that your investments are good ones.
Invest as Much as Possible
If you are offered a pension from your employer, you are contributing to it with every check you earn. It’s a good idea to invest as much as you can now so that you can enjoy that income later in life, since much of it is tax free when you are using it later on. What you should do to take the most advantage of this retirement income is to invest what you can now, as much as possible. However, do not make it so that you are living uncomfortably now. Do not take away from your current financial comfort, but do consider what it is you want to do when you retire. Do you want to start a business? Move somewhere that’s more expensive than where you currently live, travel the world? What do you want to do, and how can you make that possible in retirement?
Take your time to consider how to do this so that you can make your pension work for you in retirement. The more carefully you think of it now, the better off you will be one day. If you want to see the world, you’ll need money. Investing more now can make that possible for you one day, so that’s worth considering. However, do not cause yourself financial stress right now so that you can live the life you’ve always wanted later on. There are no guarantees in life, so it’s a good idea to make the most comprehensive decision so that you benefit all the way across the board.
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