Published by Ryan Cooley, Associate Wealth Advisor
Having a pension plan can be an amazing employee benefit and a stable part of a well-balanced retirement plan. If you have put in a lifetime career with the same employer, then you will likely see a very large portion of your compensation continue on into retirement.
However, a pension by itself may not be enough to make your dreams a reality on its own. If you are expecting a pension, you need to compare your needs for living against the income from your pension. Sometimes the pension isn’t going to be enough to provide the lifestyle that is expected in retirement, and additional savings may be in order.
Your Lifestyle Goals
When you are working hard and saving toward your retirement, it’s easy to get stuck in the mentality of just replacing the income you receive now. Perhaps your pension, combined with your Social Security payments, will be enough to keep the lights on and the bills paid. But is your goal just to have exactly what you need to survive in retirement?
When evaluating what your expenses will be after your career is finished, you need to assess both the costs for your day-to-day needs along with those associated with your personal lifestyle goals.
For example, do you want to do more traveling than you do now? What about extra trips to see the kids? Do you have a hobby that will need some cash flow? If not, would you like to be able to try new things?
Yes, you can get to the store and back in a 1995 Buick LeSabre if it runs well. But are you hoping for more of a Corvette experience in retirement? If your job isn’t paying for a Corvette now, then your pension probably won’t be paying for it later.
A detailed list of your goals and your needs will lead to a good assessment of your overall bottom line. Once you have that number, it’s time to look at how much more you need to have coming your way.
Mike is a healthy eater. He tries to make sure that he finds a way to get greens into almost every meal, and he stays away from the sweets. But Mike has never developed a taste for citrus fruits, and as a result, he discovered he had a vitamin C deficiency. Not overly concerned, he simply went to the vitamin aisle at the supermarket and picked up a supplement.
Similarly, sometimes even a really healthy pension plan needs help from a supplemental source, like an IRA or other investment avenues. The trick is to be able to evaluate how much you need to supplement, and what is the best kind for your situation.
For example, if your lifestyle goals and your basic needs will be 70% covered by your pension, then you need to invest in an avenue that will supply the remaining 30% of your needs.
But maybe you aren’t quite sure that you are with a healthy pension. Some businesses are facing significant stress over their pension liabilities, which has led to a few headlines like this one, with vastly underfunded pensions making the news.
One way you can help ensure that you don’t face a crisis during retirement is to plump up your supplemental investments. Being diversified protects you by not relying completely on your pension.
Make Sure You Are Ready
Ultimately, you are the only one who can make sure you are ready when it comes time for retirement. But you don’t have to figure it all out alone.
At Jacob William Advisory we help future retirees plan carefully and effectively so they can retire with confidence and a strong financial outlook. To get started, take the retirement readiness quiz to begin your evaluation.
For more information contact our office today by calling 410-821-6724 or emailing [email protected]. Or, if you prefer, schedule an appointment directly at https://www.jacobwilliam.com/insights/#contact.
Ryan Cooley is an Associate Wealth Advisor at Jacob William Advisory, a wealth management firm whose sole mission is to serve their clients’ needs beyond their expectations. Ryan has a military background as a U.S. Army Infantryman, and he applies the values and character traits he learned through his experience to his role as a financial advisor. To this day, Ryan is passionate about veterans’ issues and holds a seat on the Advisory Board for Operation Second Chance, and is a lifetime member of the Disabled American Veterans organization. Ryan obtained his bachelor’s degree in economics and his MBA from the University of Maryland. Outside of the office, Ryan enjoys spending time with his wife, Germaine, and their two wonderful children. He currently resides in Urbana, Maryland, and loves to fish, hunt, cook, watch Maryland Terrapin sports, and cheer his son and daughter on in all of their activities. To learn more about Ryan, connect with him on LinkedIn.
A diversified portfolio does not assure a profit or protect against loss in a declining market.