Hi, I’m Erik Wolfers, I’m the founder and managing member of First & Main Financial. We’ve been helping clients with personal financial solutions since 2001. Today I want to talk a little bit about pensions.
We did a financial plan today for a client with a pension. You might think that pensions don’t exist anymore; they do. Some of our clients have them. It makes financial planning somewhat easier because if they have a relatively large stream of income that’s guaranteed for the rest of their life, then that can make planning somewhat easy.
Generally most people do save in a supplemental fashion on top of the pension. This allows them to have a relatively healthy and comfortable retirement. Some clients have pensions and retirement savings and Social Security, and thus feel pretty good about their retirement—unless they are working for a company that has a pension that may go away.
The reason there aren’t that many pensions anymore is because a lot of companies, and a lot of public entities, have not wanted to put in the money required to fund the pension for their members. But some pensions are very strong and have been well funded.
A pension is like a bond—and so if you have a guaranteed stream of income for your life, then you can manage your other retirement savings differently; possibly take more risk, which might enhance your wealth overall, which either allows you to have a better lifestyle in retirement, or give some of your money away to the places that you want or leave a lot of money for your heirs.
And so pension still do exist. They are just more rare. We recently started with a new client who has a pension with cost-of-living (COLA) included and also a very high payout relative to what the cash value would be. That’s an extremely attractive and unusual pension. Most of them just pay a constant stream of income for the rest of someone’s life.
But they do exist and some people try to get jobs that have pensions—and if you have one, it can be a huge positive.
If you are looking for some financial guidance; whether for a one time financial plan or continuing advice on your investments, we invite you to meet with a First & Main Financial planner for a free consultation. We would be more than happy to sit down with you, assess your situation and review our services to help navigate your financial future.