
Pensions
5 Ways To Increase Your Pension Check
To maximize your retirement, you should try to maximize guaranteed income available to you. Here are 5 ways to increase your pension check.
At one time in history, pensions were the bedrock of the American retirement. They provided a way for individuals to transition smoothly from working to retirement by providing a replacement for their income that they could depend on — no matter what happened in the market or how long they lived. But now they’re becoming extinct, and instead a new solution is emerging: private pension plans.
American Express started the trend back in 1875 with the introduction of the first pension plan in the United States. Adoption picked up over time until the peak in 1980, when almost half of private sector employees were covered by pension plans. But now, less than 5% of American workers joining the workforce have access to these private pension plans.
The decline of employer pension plans was the result of many factors, including:
But, while pensions as they were structured at the time stopped being the appropriate retirement solution, their replacement was never meant to be the 401(k). 401(k)s were created for senior executives, who already had maxed out their pensions, to accumulate more wealth to support their retirement lifestyles. And that’s what the 401(k) — and IRA — should be: a source of supplemental income once your fundamental living expenses have been covered. Since they don’t offer any guarantees or protection from the market or your own longevity, 401(k)s just cannot provide financial stability in retirement.
Employers are not the only institutions equipped to provide pensions to people. In fact, in the early days of the defined benefit pension system (first half of the 1900s), pensions were actually group annuity contracts managed by insurance companies. Employers were simply paying insurance companies to buy annuities on their employees’ lives. Insurance companies are professional risk managers, making them much better suited to manage the investment and longevity risks involved with providing guaranteed lifelong retirement paychecks to individuals.
Over time, employers started to feel they could do the financial and risk management that the insurer was doing themselves. They stopped paying money to insurers to buy annuities for their employees and instead created pension funds. They developed formulas for how large someone’s benefit should be based on salary and years of service. They decided how much money to set aside today to fund those future benefits. And, they decided how to invest the money. For years the system worked, and it was financially advantageous for the employer. They got tax benefits for the money they set aside to fund the pension, and most of the benefits they were offering weren’t going to come due for decades. But, driven by their aging workforces, market volatility, and changes to pension accounting rules, employers found pensions too much to manage. So what did many of them do? They asked insurance companies to buy out their pension funds and take over the responsibility of managing them.
So, to summarize: Pensions used to be annuities. And then they weren’t annuities. And now they’re annuities again. That sums up the history of pensions. So what about the future?
Employers are no longer offering defined benefit pension plans, but insurers are still experts in managing investment and longevity risk. To date, they’ve done so through income annuities — both immediate (purchased right before retirement) and longevity (purchased years before retirement). But, these products and the distribution of them are ill-suited to be a real pension replacement. Purchasing them requires someone to have already saved a significant amount (minimums are typically $20,000+), find a trustworthy agent or broker, do due-diligence their agent/broker is showing them options across insurance companies, fill out a paper application, and wait 1 or more months for the policy to be approved.
But, instead, private pension plans could be easily accessible and look something like this:
An online platform exists with a full marketplace of options that an individual can see for themselves.
At Blueprint Income, this is precisely what we’re building. We’re trying to create the future of pensions. We started by creating a marketplace for existing income annuities where individuals can run their own quotes, compare options, and purchase if desired.
Now, with the Personal Pension, we’ve made it possible for you to have pension-like income in retirement which you fund over time. Today, the minimum to get started is $100. After opening an account, you can make subsequent contributions of $100 or more, each of which will increase your pension check.
If you don’t have access to a pension through your employer, the Personal Pension is the next best thing. If you’re interested in starting you own Personal Pension, you can do so on our website.
Click to see what contributions into 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.
From there, you can fill out the information to have one of our specialists follow up with you, or continue with the enrollment process on your own.
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To maximize your retirement, you should try to maximize guaranteed income available to you. Here are 5 ways to increase your pension check.
If you don't have an employer pension plan, you can use a private pension (Personal Pension) to create one for yourself. Every dollar you put in buys you insurer-guaranteed income.
You can protect your retirement savings by starting a Personal Pension with as little as $5,000 (the just Get Started Approach). Or, you can design one using the Income Gap or Asset Allocation approaches.