A pension can be a wonderful income source throughout retirement. It’s important to understand how your pension plays a role with your overall financial plan. Inflation can play a pivotal role against a pension and in todays video you’ll learn the strategies to protect what you worked so hard for.
Learn the tips & strategies to create your secure retirement.
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Great video
Thank you James for this great explanation of the variables and how they need to be considered. I have not seen such a clear explanation of this elsewhere on YouTube. I am in Canada with a federal employee pension, one other issue is that the cost of living indexing number maxes out at just over 2%, something a lot of people don’t realize with their “indexed pensions”. With high inflation even people with “good pension plans” need to read the fine print!
Making money is an action. Keeping money is behavior. Growing money is knowledge.
Our pension is a lump sum and for every one percent increase in interest rates it lowers my balance by 10%. Time to retire
Well done. Thank you!
Inflation is there, but it is also quite individualized… Retirees often own their own homes, can control driving, and can adjust food and other spending. Inflation has not been very impactful to us though I know it can be much worse worse for others. A pension is just one piece of the puzzle and how you take or use it is also a variable. So personally, I do not spend much time worrying about the effects of inflation on my pension.
James, great video! I’m 59 1/2. Just retired.
Another option is my private pension does not have a COLA. But, if I delay pension every year till 70, I get a 12% increase per year on pension. I’m thinking take pension and SS at 70. Live off pretax for about 10 years till I have just Roth, pension, and SS. Thoughts?
very well explained
Interesting. It’s where I’m at now. However, not able to get a lump sum, but can only withdraw 15% of value and then get a monthly.
I retire at the end of this month at 64 years old, I had 28 years with my company and had a choice of a monthly annuity or the lump sum option, I chose the lump sum. My company tags the fed interest rate on August of the previous year, last August was 0.6%. For each 1 fed interest rate point they reduce the lump sum pay out by 10%. to 12% I was not about to lose 25% to 30% of my payout. That lump will roll over into my existing 401K and IRA.
My pension is a military pension, and that, along with my VA disability compensation is increased annually with CPI. I received a 5.9% increase on both last year and will more than likely receive 8% or higher on both this coming year. Knowing that, the CPI doesn't influence how I spend my retirement. Additionally, I have a 2.25% mortgage and no debt so it only increases the cash flow coming in. If you add my wife to mine, she will have a Federal Civilian pension, so hers will also adjust based on CPI. Our situation is not common and I understand that. I will say, however, we are not fortunate. We put ourselves in this situation and saying we are fortunate lessens the action(s) we took. I know the cost of inflation, many family members struggle with the increase in costs.
Thank you for another informative video
James, thanks so much for doing this video! When I was retiring in March no one was providing this information, but my son is a CPA so we hobbled our way through it. This allows more people the base information they need to get started.
I just retired in March and took the lump sum before any of the tax increases happened. However, you need to check with your company and see if they will shake loose with the calculation for the lump sum payment. It took me several requests and weeks and I finally got a confusing formula that covered the interest rate today along with the projected interest rate 5 years out and then a longer term interest rate. Also the lump sum for my company reduced every year after 65 as they only use 80 as the projected life of the payout for the calculation, so the closer to 80 you retire, the less they have to pay out. It's usually very involved so check with your company before you make any decisions. Remember interest rates will go down some when the Fed has reduced inflation, so the lump sum amount could go back up in a couple of years. Good Luck! I hope you get as much as possible, like I did!
Fabulous! Thank you!!
Very well explained and easy to understand!
It's very overwhelming sometimes trying to figure out pensions.
James Conole has some of the best financial content on YouTube. Thanks, James!