Information for Participants

It can be helpful to start with definitions. There are several types of plans available to individuals, but this discussion will address the two main types of employer-sponsored pensions:

• A Defined Benefit plan, typically funded by the employer, guarantees a specific monthly payout for life, based on factors like salary and years of service. If you are covered by a defined benefit plan, you have little input into your plan; your goal should be to increase your salary to the extent you are able, and to accumulate years of service.

• A Defined Contribution plan is most often funded by the employee – you – although your employer may contribute money or your behalf, or offer a match. Your account balance and eventual payout depend on the amount you contribute and performance of your investments, which is where efforts matter.

The Importance of Planning

The goal of retirement planning is not merely to save money; it is to ensure financial security in your later years. A well-structured plan can provide steady income during retirement, allowing you to maintain your lifestyle and adapt to changes that may arise. Starting early is key; the sooner you begin, the more time your money has to grow. But the old aphorism is also true: Better late than never.

Investment Strategy

Default investment funds are designed for simplicity and regulatory compliance, not for your specific circumstances. As your account grows, it’s worth reviewing your investments and strategy to assess whether they match your risk tolerance or if it’s time to rebalance.

Reviewing Old Pensions: Consolidate or Diversify

It is not uncommon to hold multiple retirement accounts. The decision to consolidate shouldn’t be automatic. Consider consolidation to reduce lower total fees and for easier monitoring and rebalancing. On the other hand, keep your separate accounts if you want access to unique fund options, for different retirement ages or account benefits, or protection features built into older accounts.

Before Retirement, Decisions That Matter Most

In the final years before retirement, your pension is likely one of your largest financial assets, and your decisions can have a significant impact on your post-retirement lifestyle. This is when planning shifts to positioning in order to maintain your assets. Some questions to consider:

• Will you stop working completely, or gradually slow down?

• How much income do you need for essentials? for lifestyle spending?

• How is your spending likely to change over time?

Many people overspend early in retirement, and underspend later. Planning for variable income, rather than a steady income number, can create more resilience in your assets. It’s important to maintain liquidity and flexibility in your assets so that you can avoid selling during any market downturns.

Planning for Longevity and Uncertainty

Retirement planning is ultimately about managing uncertainty. You don’t know how long you’ll live, what your future returns will be, nor how changes in tax policy may affect you. You should plan with a goal of being able to respond, as much as possible, to unexpected changes in your personal circumstances, as well as to developments in the world at large.

Your future is worth investing in. If your employer hasn't yet established a retirement plan, have the contact us.