The days of every company offering their employees a pension plan, thus taking the pressure off of retirement planning, are behind us. Only 15% of people currently working in the private sector have employer-managed pension programs. With proper discipline and planning, however, people can create a similar benefit with their own investments.
What is a pension plan? It’s a defined contribution made into a retirement account with every paycheck throughout one’s career that culminates with receiving a monthly set amount upon retirement. Whether you work for a company that does not offer this benefit or are self-employed, you can establish your own type of pension plan.
How does it work? Like a traditional pension plan, establishing a personal pension plan involves diverting and investing a portion of your paycheck every month until you retire.
Adding a Pension Plan to Your Retirement Plans
The goal of a personal pension plan is to receive a check, or checks, that get deposited in your bank account every month, providing a steady income stream during the golden years. When planning how much that monthly amount will be, consider all sources of retirement income to which you are entitled. Start with Social Security: in 2019, the average monthly SS benefit per person was just over $1,400 per person. This number goes up to nearly $4,000 for the highest earners.
If you have accumulated balances in a 401K, Individual Retirement Account and/or Roth IRA, each can also contribute to your monthly income stream. You may elect to set up a monthly withdrawal after the age of 59½ from any or all of these accounts. If you do not need to do so, the Government requires that you begin taking monthly minimum distributions after the age of 70 from both your 401K and traditional IRA. Roth IRA’s are not subject to the same rule.
If your company does not provide a pension, you can set up your own personal pension plan, consisting of monthly distributions from Social Security and retirement accounts. Some additional ways to increase your pension include fixed annuities, insurance plans, mutual funds and reverse mortgages.
Setting up your own pension takes time and effort but it can be extremely worthwhile if you’d like the ease of a set monthly income during the retirement years. Don’t forget to complete your retirement planning by speaking with an attorney about safeguarding your nest egg with an asset protection plan.
Who to Speak to First
With decades of experience as an asset protection attorney, Jeffrey M. Verdon has seen the damage that incomplete retirement planning can cause. Without asset protection, a lifetime’s worth of hard work and saving can be devastated by excessive taxes, lawsuits, and frivolous lawsuits.
Call or click to set up a consultation if you’re interested in hearing more about asset protection or how to partially shelter your money from the heavy U.S. tax burden through the use of Malta Pension Plans.