
The Personal Pension
Monthly Retirement Paycheck for Life
The Personal Pension is a monthly retirement paycheck guaranteed by insurance companies. Every dollar you put in buys you steady monthly retirement income that you can't outlive.
Like the employer pension plan, the Personal Pension provides you with a predetermined amount of monthly annuity income once you retire. The monthly income never changes, no matter what happens in the market or how long you live. Contribute more and the amount of income you’ll get in retirement goes up. Stop contributing and the amount of income you’ll get each month stays where it is.
The income is guaranteed by a highly-rated insurance company, such as Lincoln Financial or Guardian.
To explain how it works, let’s use an example.
For example, let’s consider a 30-year-old male signing up for a Personal Pension that will start on his 70th birthday. The following table shows how much income he can expect to get for every dollar he puts in between now and then. To explain the first row of the table, at age 30, a $1,000 contribution would get him $291 per year starting at age 70.
Because the Personal Pension provides income for life, it’s impossible to calculate the return he’ll make ahead of time. But, if we assume he lives until 80, his IRR will be 2.6%. The longer he lives, the more income he’ll receive, and the greater his return will be. If he lives until age 100, his IRR will be 4.2%.
The rest of the table provides an estimate of future rates, but those are likely to change once he reaches those ages. Assuming no change in rates, though, the earlier you contribute, the more income you’ll get.
Current Age | Annual Income per $ Contributed | IRR @ Age 80 | IRR @ Age 90 | IRR @ Age 100 |
30 | 29.1% | 2.6% | 3.7% | 4.2% |
35 | 24.9% | 2.6% | 3.8% | 4.3% |
40 | 21.3% | 2.5% | 3.9% | 4.5% |
45 | 18.2% | 2.3% | 4.0% | 4.6% |
50 | 15.4% | 2.1% | 4.1% | 4.8% |
55 | 12.8% | 1.7% | 4.2% | 5.0% |
60 | 10.7% | 1.1% | 4.3% | 5.4% |
65 | 8.7% | -0.5% | 4.3% | 5.7% |
Let’s say this 30-year-old gentleman contributed $1,000 annually until he turned 70. Using these rates to project forward, that would produce a pension benefit of $6,600 per year starting at age 70 and continuing for life. ($10,000 annual contributions would result in $66,000 per year.) If interest rates go up, it’ll be more.
Living to 100 would mean paying $1,000 for 40 years and then receiving $6,600 for 30 years. Over those 70 years, his pension will have produced an IRR of 4.6%.
If you’re interested in starting you own Personal Pension, you can do so here on our website. Click below to see what contributing to a Personal Pension will guarantee you in annuity retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit. A $100 contribution is necessary to start an account.
From there, you’ll get access to our team of specialists to help you analyze your retirement finances and walk you through the application process.
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The Personal Pension is a monthly retirement paycheck guaranteed by insurance companies. Every dollar you put in buys you steady monthly retirement income that you can't outlive.
The Personal Pension provides guarantees and protection that the 401(k) does not, namely from longevity and market risks. Use a Personal Pension to supplement your 401(k), making sure to always take advantage of the 401(k) employer match.
The private pension (Personal Pension) provides a pension guarantee, which is a guarantee of steady retirement income backed by top-rated insurers. It's made up of annuities, which can be thought of as the opposite of life insurance.