Exit Strategies from a Pension for the Life you Choose

Exit strategies from a pension are a vital consideration to enjoy the life you choose with the pension values you've accumulated.  Some people choose to stay in their pension plan (and some pensions don't even allow a choice).  Yet many are electing to move their money from the pension into a self-directed strategy.  The choice is a personal one, and the issues are vital and irrevocable.

Exit Strategies for the life you choose

In this website I've shared some eye-catcher stories to help people see the control and choice they may have over their pension assets.   Marie, due to her own poor health, was saving pension value as an estate for her grandchildren.  She couldn't have done this inside a pension plan because at her death the money would have reverted to the pension trustees.  So Marie moved the money out into a personalized pension plan.

Pat started a new business with seed capital from her pension.  This wouldn't have been possible inside a typical pension plan.  Where Pat lives, she was able to unlock part of the pension and draw it as a lump sum to build a new business.  Her remaining pension income meant she could avoid drawing salary from the business.  Over ten years she believes her business will become a far larger nest egg than the original pension (and better for tax, too).

Exiting to a Personalized Pension Plan

More often people view their pension as an income-for-life.  That should assume pensions weren't under-funded and at risk of being cut.  Some pensions have dropped at least 50%.  You didn't want those risks.  So the modules I've build into this website can help you evaluate the issues and security for your pension and whether you'd stay under its wing or move the pension values out.

Exit strategies from a pension will involve choosing the income you want to draw, and when it will have the most value for you.  Eric needed to double-up on his income to cover his wife's health expenses at that time of their lives.  The regular pension would have forced them to lose their home, or to cut her health care.  A personalized plan allowed Eric to set his income where he needed it to be.

George on the other hand wanted to delay his pension income as long as possible.  He was earning a high consulting income.   Receiving pension would have forced him to pay higher taxes when he least needed it.  With George's personalized pension arrangement he could keep his pension assets in growth-mode to at least age 70.

Point is, you can create your own story.

LHA_picIf there's an overall theme of my writing, it's affirming that life itself -- the lifestyle and wishes you hold dear -- are more vital than money.  Money serves life!  Not the other way around!   So this means you should be able to write your own story!

So consider the choices.  Which view here to you prefer, and which one may be healthier?  One person says, "Here's my pension allowance, so what kind of life can I have?"   Another may say,  "What kind of life do I want to enjoy, what security and freedom for my future, and what experiences for me and my family..., and given that lifestyle how will I design my financial resources to create and sustain that lifestyle?"   (PS: look further where I describe the five primary income-mandates.)

Consider a few questions on these exit strategies for your pension and your future:

  • do you see your future as a flat-line of steady never-changing needs, easily served by a fixed-allowance that to some degree is assured for life?
  • do you believe the best time to increase travel and living expenses is in your early years when most people still have the most energy?
  • would you want the ability to suddenly draw more income if dreams expanded or even if health failed, to provide the most comfort or pleasure life can offer you?
  • if you're exiting a pension to get a personalized income, how are you confirming the loyalty and integrity of the advisor and firm who must fit income to the seasons of your life to age 95 and beyond?
  • are other members of your family impacted by your choices?  ...eg a spouse or children, or your charitable giving,  as your choice may expand or extinguish the value they would receive?

Pension values to fit the Life you Want

In shorRiver Cruise RetMt, pensions may let you choose a typical pension income, or to move your accumulated value into a personalized plan.  So consider carefully for yourself and your loved ones ...

How can exit strategies from a pension best assure your lasting comfort and confidence?  Which decision will help achieve your bucket-list and lifelong dreams?  How will you manage potential risks?  What of future health costs?   Are there ways to reduce the tax burden?  ...or to build new business interests?  ...or enhance estate values for your family? ...or make a bigger impact in philanthropy?

The choice is yours.  Exit strategies from a pension can make a major impact for your own life and those dearest to you.   (For further video discussion click here.)

More in our learning modules at:  guaranteedIncome4Life.ca
Amazon or Kindle:   "A Lifetime Of Wealth -- And How Not To Lose It."
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Brian Weatherdon, MA CFP CLU CPCA MDRT

 

7 comments

  1. Are you saying everyone will be better off leaving their pension plan?

    • Hi Ben, it certainly doesn’t mean everyone should leave their pension. Thank you for asking.

      What is vital is for people to know their rights, and the decision they can often make to align pension values with their personal circumstances and needs. Learning modules in this website (and my book, A Lifetime Of Wealth — And How Not To Lose It) clarify that some pensions don’t allow the choice.

      Leaving a pension could mean losing certain benefits that you’ll need to replace in some other way. Health insurance for instance continues for some people with their pensions. I know of a pension plan with 8% inflation protection: that’s rare, but stay in such a plan unless you find other strong reasons for leaving. And pension trustees may be far wiser in practice than the average retail advisor: commuting a pension could put your money at risk! So people should confirm what their pension is promising, whether those promises are safely secured with adequate funds, and what other factors will be personally important in the choice of leaving or staying in a pension plan.

      People express a variety of reasons for leaving a pension. Circle the ones more important to you: (a) illness and early death could reduce spousal benefit, and terminate value to your family; (b) inflation indexing is below 5%; (c) you want higher income for a bigger lifestyle in early years; (d) you want funds to open a family business; (e) you want a different investment plan; (f) with other earnings you’ll delay income from value of pension; (g) you want income mandates to better fit your personal life journey; (h) you want to enlarge estate value for family and philanthropy.

      It’s a personal decision. The choice is not made overnight. Allow a few months at least, to research and complete this decision with an unbiased and professionally certified advisor. This allows time to confirm pension plan details, along with your personal values around lifestyle, income, personal wealth and future estate.

  2. Trust is everything. We hear horror stories every week. I chose a leading insurer offering security unmatched by any other financial institution. There has never been a case of anyone having their money stolen by this company. Unlike many other firms, I also have guarantees protecting value of my accounts. Plus nobody has access to my money except me! In fact, one has to ask if pension funds are even as secure as what I set up with my pension money. Security – and even avoiding fraud – is everything.

    And my name is not Bernie Madoff

    Brian Bigelow

  3. Pension risks: cutbacks can far exceed 50% amid corporate & government struggles. Detroit is now emblazoned across the news but we’ve already seen this in California and elsewhere. A clip in today’s news revised a pension downward near 80%. http://ow.ly/njzoK … Whether the 78-year-old’s case was justified or not, it proves retirees have little or no control over future pension cutbacks (unless they grab the value at retirement and privatize their pension). So I repeat myself ….there’s NO risk-free option. Consider all options fully and then make your best choice.

  4. That is a very good. Short, precise… Thank you for sharing.

  5. Information you provide on this web site has helped me tremendously. Thank you for all of your time & work. “Men must be taught as if you taught them not, And things unknown proposed as things forgot.” by Alexander Pope.

  6. Here’s an idea as written-up in the Globe and Mail last Saturday: https://www.theglobeandmail.com/report-on-business/ontario-eyes-new-rules-for-pension-funding/article35067299/

    First, reduce to 85% the funding requirements from which pensions manage future liabilities.

    Second, allow at least five years (or more if needed?) for pensions to remedy their shortfall.

    Third, increase Ontario Pension Benefit Guarantee from $1000 to $1500 (anyone over that, “good luck!”).

    Fourth …oh shoot there is no #4, but with average private sector pensions at $1300/m there could be cat food.

    Fifth (missing from the article): taking charge & personalizing one’s pension to assure Income for Life.

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