Last week, I met with a client of mine about her pension plan. Joan had recently taken a pension from her employer. Her HR department offered her a standard package, and encouraged her to take it. She wanted to know what I thought.
What I found had me concerned for her. First, since she was still working elsewhere, there was no reason for her to start a pension. If she had let it sit another five or six years and then taken it, her monthly payments could have been much, much higher. What’s more, she was going to have to pay more tax due to the increase in her income.
But worse – in the event of her death, her pension would actually drop by 40%! Since this would leave her husband short, she now had to make up for that 40% downfall somehow… plus inflation.
When I asked her why she had taken this package, her response was (unfortunately) typical of many people I encounter. “I don’t know,” she said. “I just took it. It seemed to be my only choice.”
When it comes to pensions, most of us really don’t know what we don’t know. We aren’t sure what we need – we just know we need something. And when we research our options, the information is very hard to understand and full of jargon. So, we take the first plan that comes our way; a generic package that doesn’t take into account the specifics of our situation.
If Joan had come to me first, I would have reviewed her financial situation, and helped her create a retirement strategy that made sense for her… and for her family. We would have assessed the true value of the pension and requested information from the supplier about numerous options available to her. Then we would have made recommendations for action that took into consideration all her other assets, liabilities, responsibilities and goals.
So the next time you’re wondering what to do about your retirement, give me a call. After all… when it comes to making decisions about the rest of your life, it pays to be in the know!
PS: Thanks to all of you who have sent referrals our way. We appreciate your confidence in us.