What is a PERSONAL PENSION PLAN?
The old retirement model of past generations is gone. Originally, along with the gold watch, companies expected to pay retirement benefits for less than 10 years.
Today's retirement period can last 25, 30, 35 years or more. The new retirement model is all about longevity. That is why having your own Personal Pension Plan is important to make sure today's retirees have a guaranteed income long after the gold watch has quit working.
Let's take it Step-by-Step:
It appears the majority of Americans are not very positive about the prospects of having a secured retirement. Even for those lucky enough to have pensions ... they know it is unlikely to be sufficient.
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WE HAVE ALL BEEN OPERATING OFF THE SAME THREE-LEGGED STOOL CONCEPT THAT HAS BEEN USED FOR GENERATIONS.
1. Pensions: We used to think a "company pension" would be enough. It turns out we need more. A recent Towers-Watson survey stated that at the end of 1998, 90 of the Fortune 100 companies had a defined benefit pension plan in place. Today, only 17 of those companies offer such a plan to new hires. Now, most Americans are doing it on-their-own through 401(k) plans. The difference between a “Defined Benefit” pension and a “Defined Contribution” 401(k) is all in the guarantees ... or lack thereof. When it comes to a 401(k), we just keep our fingers crossed and hope for good financial returns. Plus, other than the company's "match," it is OUR OWN money we are saving and will be spending!
2. Social Security: For most Baby Boomers, and for those already retired, Social Security will, most-likely, continue through our lifetimes. However, Boomers will need every extra penny as most haven’t saved enough on their own.
3. Personal Savings: This is the most important component in planning for a successful retirement. Again, for those retired, the job isn’t over. They still need to PROTECT their retirement savings, and this is where most current plans fall short - often, very short.
HOW TO CONVERT PERSONAL SAVINGS INTO GUARANTEED RETIREMENT INCOME:
There are certainly many choices when it comes to choosing investments to create retirement wealth. However, for those who are nearing retirement or are already retired, the choices narrow immensely. There are major differences in how one should invest DURING your working years and AFTER your working years. But most advisors keep you on the "same course" because it is in THEIR best interest to do so. Is the "same course" in your best interest?
Most advisors present strategies that offer different withdrawal scenarios based upon years of past stock market performances. These simulations show, based on previous market assumptions, you should be safe and not run out of money. But, these simulations offer no guarantees. Equities are, and will continue to be for many, an important part of their retirement plans. However many people are looking for safe money places in which to invest, as least, a portion of their retirement savings.
The personal pension plan is an old idea that is making a big comeback due to its simplicity. It entails separating essential and discretionary income needs, determining the need for increased income in the future, and analyzing assets available for income today and the potential income they would provide. Then we need to determine... how much do you need and when do you need it? Sounds simple, doesn’t it? That is why it has returned to strong favor today.
Many proactive Americans are taking some at-risk money and placing it in safe money instruments. Many have determined they are at a place in life where they want "zero investment risk" and are willing to sacrifice the potential of great returns for the comfort and tranquility of guaranteed-income-for-life that cannot be outlived. This all depends on needs and timelines. How much does it take to fund the guaranteed income you desire?
The Personal Pension Plan is not a one-size-fits-all plan. Therefore, we will need to gather some information, map out the amount of income you absolutely need, determine when you will need it, and take into consideration any special needs or desires you have. And, put in some very important PROTECTION for your income to make sure, when life's challenges enter, your "absolutely need" income will not be disrupted.
When most Boomers or retirees are asked, “How long do you want your income to last?” They answer “Forever.”
Does your current financial plan include the two most important components of a quality retirement income plan - Guarantees and Protection?
Click here to learn more about fixed annuities and why they are a typically a great solution for creating a Personal Pension Plan.
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Harry L. Ehrenberg
Little Rock, Arkansas
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