Pensions for Everyone? Yes, Even You.

We know that a pension was pretty standard back in the day. In 2024, I wouldn’t be surprised if people newly entering the workforce don’t know what a pension is.?

For those of us in-betweeners, we saw our grandparents (and in many cases, our parents) receive a steady income from their pension checks during retirement.?

Yet, for most of us, a guaranteed source of retirement income seems like a thing of the past. Unless you took a government job, odds are you aren’t funding a pension right now, are you?

The good news is the landscape of retirement savings is evolving with Gen X and the Millennials. While the concept of working for the same entity your whole life and staying on their payroll after retirement is not happening anymore, we are seeing more and more tools becoming available to create the same outcome: guaranteed retirement income.

Today I’m going to outline how “pensions” can be accessible to anyone - even the self-employed.?

Enhanced Pensions: The Shift in Retirement Planning

Here’s a fact everyone already knows: The responsibility for retirement planning has increasingly shifted from employers to individuals in the last four decades.?

We are now responsible for contributing to our own version of a pension through the employer into qualified plans like 401(k)s and IRAs (both of which are heavily taxed once we hit retirement).?

In America, it seems like working professionals view saving for retirement in one of two ways:

1. Something their employer did for them (the good old days) in the form of a pension
2. Something they did through their employer (present-day) like qualified plans.

What’s being severely overlooked is the fact that individuals can and should adopt a pension-like mindset no matter what their employer is or is not doing.

How to Create Your Own Pension

This is a no-judgment zone, so answer honestly. Before this moment, did anyone ever explain that you can utilize retirement savings tools without going through your employer? Before the social media age, it seems like we were all essentially trained to think that saving for retirement just meant contributing to your 401k.?

Side Note: I have nothing against a 401k - they’re great savings vehicles.

My point is this: Most of us were not taught that we can create a pension ourselves, whether we fund our employer’s 401k or not.

In short, you can create your own pension by utilizing a tax-efficient savings tool designed specifically for long-term income generation.

Things like annuities, interest from life insurance policies, dividend-paying stocks, and bond ladders all offer pension-like benefits. Here’s a bit about each:

Annuities

Per Investor.gov , “An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments. Similarly, your payout may come either as one lump-sum payment or as a series of payments over time.”

Whole Life Insurance Cash Value

Just like your bank pays interest on the money you give them, your insurance company pays interest too. Specifically, they’ll pay you interest on the value of your policy’s account. Overfunding life insurance is similar to an annuity in that it’s also through an insurance company. It involves owning a policy and having a death benefit while also contributing to the account as a savings vehicle. Here’s a free retirement tax calculator that shows the income improvement from utilizing this strategy as compared to a typical savings account.

Dividend Paying Stocks

Fortune explains dividends as “periodic payments made to shareholders by the company they’ve invested in. Dividends can come in different forms and at different intervals.” Choosing a dividend-paying stock guarantees some form of steady income if the stock is doing well.

Bond Ladders

Morningstar explains, “A bond ladder is a portfolio of individual bonds whose maturity dates are staggered over a set number of years. As one bond matures, it is replaced with a new bond at the maximum maturity for the strategy.” Incorporating this into your portfolio can provide a nice stream of income over time.?

Pension Planning and Professional Advice

I know making time to plan for the future is nearly impossible with the endless to-do list we all seem to endure in today’s world. With that said, taking 30 minutes to speak to your trusted financial advisor about developing a pension-like income stream(s) is absolutely worth making time for.

A? proactive approach to saving means you don’t rely on an employer plan you don’t control. Almost everyone can create a pension and guarantee themselves retirement income in 2024. Look for tax-efficient options, especially if you’ve already been funding your deferred tax accounts.

Please don’t hesitate to reach out with any questions you have about pension tools: 773-318-9608 or email [email protected]

Feel free to use our complimentary enhanced pension calculators to gain more insight: https://enhancedpension.com/