What Box to Check for My Retirement Benefit?

Wealth management…

“Brian, I’ve been offered retirement from my government job, and I’ve got to decide on how to take my monthly pension. Some people are advising me to take the maximum amount. But that benefit will end when I do. I’m married, and thinking about taking a lower benefit, so that my family will receive benefits. What do you do you think I should do?”

More and more people are finding themselves retired. It may be voluntary (e.g. the maturing of the Boomer generation), or not (e.g. economic conditions and tighter budgets). Retirement is one of the greatest of life’s transitions. Issues include both emotional and financial concerns. The biggies include security (having enough to last our lifetimes), control (shifting to being a “spender” of wealth after being hard-wired to being a “saver,” or having to depend on “the markets” to generate cash flow rather than working a couple more hours), and confidence (what am I going to do next).

The pension election is one of many questions to be answered in retirement planning. I’ll share some conversations I’ve had with new retirees. Perhaps they’re relevant areas to discuss with your spouse and advisors.

Pension Election: Generally, government pension programs provide a basic monthly benefit determined by a formula (e.g. compensation, service, etc.). That unmodified allowance, is payable for your lifetime, however, you’re betting that you will outlive your spouse. To protect the family, there are optional pension amounts. In those cases, the benefit you receive is reduced (i.e. benefit period needs to cover two lifetimes) and your spouse is entitled to a survivor benefit (e.g. the same amount, half, etc.). Financial factors to consider include life expectancy, your family’s financial needs, other investment assets (and life insurance), and future investment returns.

Getting Serious About Your Money: The reality of retirement should force you to run your finances like a business. That includes knowing where your money goes… have a spending plan (budget). Tools include on-line banking systems and personal finance software programs (e.g. Quicken, AceMoney, YNAB – which stands for You Need A Budget, and others). Any gap between what you spend and pension benefits, needs to be filled by future earnings and investments. Thus, time to review financial, investment, tax, insurance and estate plans with your trusted advisors. And if you are an expert in all those areas and are confident you can do it yourself, here’s a thought – someday the Kevlar in my Superman pajamas will run thin… my spouse ought to know everything about the family’s finances, and have trusted experts to step in.

Your Next Career: Better they be Golden Years rather than Yearning Years. For married couples age 65, there’s better than a 60% probability that one will live to age 90. May that two or three decade (or more) life of retirement be more than leisure. I suggest staying in the game. It’s an opportunity to refresh and re-tool – personally, professionally, spiritually, and community – and to live life with independence and dignity.

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