So, you are on the verge of retirement and you are faced with a difficult choice regarding the defined-benefit pension plan you are fortunate enough to have. Before you make an irrevocable decision, here's three common pitfalls to avoid.
This is a deeply personal subject for me. My Grandpa Ervin was in public service and had a pension when he retired. At the time, he took, what I would consider, some bad advice. Grandpa Ervin was advised to take the "0% survivor benefit" meaning he would receive the most money per month. But, none of the benefit would be transferred to my grandma if he died. Well, 15 years ago, I'm sad to say my Grandpa Ervin passed away. Meanwhile, my grandma is still alive and in her upper 90s. Over 15 years of income has been lost for my grandma because of one misguided pension decision made decades prior. This taught me important lessons when considering pension benefits.
Consider your income needs now AND in the future
Many times the easiest way to decide your pension benefit is to take the biggest monthly check or lump sum. And since retirees tends to spend more in the early season of retirement, this may make sense. But, far too often, people don't consider their income needs later in retirement especially if the pension owner passes away.
Don't misjudge the life expectancy of you or your spouse
It's not something we want to think about, but we need to have a realistic view of our life expectancy. My Grandpa Ervin had a stroke in his 40s which forced him into a career of public service, thus allowing him to have this pension. His health history should have raised some red flags regarding his decision for the "0% survivor benefit". In addition, statistically speaking females tend to live longer than males. Grandpa Ervin didn't take this fact into consideration either.
Consider the "life aspect" of pension income in case of death
We tend to make financial decisions based on numbers. But, you have to consider the "life" aspect of money and pension income. How difficult would it be to lose your spouse and lose 50% or 100% of your monthly pension income at the same time? Don't put yourself in a position where you have to adjust your life because of a death and loss of income.
If you have a pension, we would love to help you make the best decision possible for you and your family.
Please, give us a call at 320.222.4236 or click on "Request a Meeting" to schedule your no-cost, no-obligation review meeting.