It can be difficult to choose between different pension options. A pension plan that will provide your spouse with monthly pension benefits after your death is a better option, but it can be difficult to choose. A pension plan that pays only for your lifetime may provide higher monthly payments, but it can be more secure. These plans require a lump sum to protect spouses in the event you are no longer around. To determine which pension option is best for your retirement needs, use a pension strategy.
A pension plan is a type retirement plan in which employers promise to pay a defined benefit for employees until they die. It is different from a defined benefit plan like a 401(k), in which employees invest their own money in an employer sponsored investment program.
When you turn 55, pension withdrawal (also known as drawdown) becomes an option. You can withdraw up to 25% of your pension tax free – either in a lump sum, or in smaller amounts. If you choose to set the toggle, the retirement planner assumes that you will take the entire 25% tax-free amount. Your current projection will not be affected by the fact that you are taking a tax-free amount.
It is important to include retirement savings when you are setting up your budget. You can save by setting up a retirement plan at work, saving on your own, and both. The target retirement savings rate tool can help you determine how much to save each year. Your savings will grow faster if you start saving sooner. Inflation can reduce your income estimates to today’s dollars, making planning your retirement income easier.
RetireSharp Wealth Management, LLC is a registered investment adviser in the state of Florida. The adviser may transact business in states where it is appropriately registered, or where it is excluded or exempted from registration. Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any securities or investment advisory services. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser or a tax professional before implementing any strategy discussed herein.
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