Why don’t you have a pension?

When it comes to choosing a retirement plan, there are several options we have to choose from, but many of us forget or are unaware that we can have almost all of them and not be held to just one or two plans. In fact, I recommend you have at least five types of retirement plans. But, how do you know which ones are right for you? That is something we look at on an individual level with each of our clients because there are many factors that will determine what plans are best for you so  if you are not working with an advisor to help you select these plans based on your needs, family, risk tolerance, tax rate, age, etc. then you are not set up properly for retirement.

Sadly, one of my favorite retirement plans is slowly fading away, the pension plan. A pension plan, according to Investopedia.com, is a retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker's future benefit. The pool of funds is invested on the employee's behalf, and the earnings on the investments generate income to the worker upon retirement.

This means that retirees would be able to receive this money guaranteeing lifetime income, in almost all cases, as long as the employer is in business. It all changed in the early 1980’s when companies started introducing the 401(k) plans named after the IRS code of The Revenue Act of 1978 which allowed employees to put money aside for retirement on a tax deferred basis and was meant as a supplement to the pension plans and Social Security. However, companies saw this as an opportunity to reduce and eliminate pension plans over the years saving themselves from paying retirees a salary for the rest of their lives.  When the 401(k) plans were introduced, we were in a high interest rate market so it made sense to defer taxes to a later period of time when interest rates came down. Now we are at historically low interest rates, does it make sense to defer taxes to a later period of time?

Most employees enter the workforce today with knowledge of one or two types of retirement plans. The 401(k) or the 403(b) plan that their company offers allows you to contribute as the company may offer matching contributions. Rarely are the employees educated by their employer on other types of retirement plans available to them or whether they are a good fit. Another type of retirement plan, the IRA (Traditional and Roth) is also commonly known to many employees but usually only after they have left a previous employer and was told to “rollover their 401(k) into an IRA” or they may be instructed to fund one at the advice of their tax advisor or accountant. Many workers have both a 401(k) plan with their current employer and an IRA from their previous employer, and there is usually nothing wrong with that. However, neither can guarantee that you will not run out of money before you pass away like a pension does, and you may end up paying more taxes.

So what can you do? You can actually create your own pension plan using your own money. Where many advisors will tell you how much money you need to retire, we at Thrive do not do it that way because we know that number may not be enough and it has a finite end to it. Contact us today to find out how we are different and how you can create strategies to help you avoid the possibility of running out of money and create your five retirement plans.       

484-206-4200

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How To Get a Bigger Social Security Retirement Benefit

Many people decide to begin receiving early
Social Security retirement benefits. In fact, according to the Social Security Administration, about 72% of retired workers receive benefits prior to their full retirement age. But waiting longer could significantly increase your monthly retirement income, so weigh your options carefully before making a decision.

Timing counts

Your monthly Social Security retirement benefit is based on your lifetime earnings. Your base benefit--the amount you'll receive at full retirement age--is calculated using a formula that takes into account your 35 highest earnings years.

If you file for retirement benefits before reaching full retirement age (66 to 67, depending on your birth year), your benefit will be permanently reduced. For example, at age 62, each benefit check will be 25% to 30% less than it would have been had you waited and claimed your benefit at full retirement age (see table below).

Alternatively, if you postpone filing for benefits past your full retirement age, you'll earn delayed retirement credits for each month you wait, up until age 70. Delayed retirement credits will increase the amount you receive by about 8% per year if you were born in 1943 or later. The chart below shows how a monthly benefit of $1,800 at full retirement age (66) would be affected if claimed as early as age 62 or as late as age 70. This is a hypothetical example used for illustrative purposes only; your benefits and results will vary.

Early or late? 

Should you begin receiving Social Security benefits early, or wait until full retirement age or even longer? If you absolutely need the money right away, your decision is clear-cut; otherwise, there's no ''right" answer. But take time to make an informed, well-reasoned decision. Consider factors such as how much retirement income you'll need, your life expectancy, how your spouse or survivors might be affected, whether you plan to work after you start receiving benefits, and how your income taxes might be affected.


Broadridge Investor Communication Solutions, Inc. Copyright 2016.

Outliving Your Money

As we grow older, we are spending more and more time in the retirement phase of our life thanks to medical advances and healthier diets which are causing us to live longer. But at what cost?

If you knew today that you were going to live to be a healthy 125 years old, what would you change? If you had the ability to walk, talk, hear, see, and do all the normal functions of life without any outside help, would you want to live that long? Many people I have talked with said "YES", however, they all had one fear. That fear is not being able to live the same lifestyle due to the possibility of not being able to afford it. So people are afraid that they are going to run out of money. Here is my biggest issue with that, there are ways to avoid it that many people have no idea about!

That is what we do at Thrive, we educate our clients on what all of their options are so they can make an informed decision and live a comfortable and happy retirement without the fear of running out of money. If you are currently working with an advisor, talk to him or her about guaranteeing your future. If they can't, then what are you paying them for? It may be time for a new advisor. Contact us set up a meeting for a complimentary second opinion on your retirement income and discuss how YOU can secure your future.