If you work in the public sector, chances are you’ve been contributing to a pension plan for years. While this plan is designed to provide you with a steady income in retirement, you may be curious about other options available to you.
One such option is commuting your pension. We may have mentioned this before – once or twice!
The reason the Fowler team is committed to discussing this topic is because we strongly believe that individuals who have dedicated their lives to civil service should not feel limited to a single option. Especially if that option doesn’t fit their needs.
Commuting your pension means you’ll receive a lump sum payment in exchange for giving up your future pension payments. This can be an attractive option for some, as it provides a large sum of money that can be used to pay off debt, invest, or spend as desired.
However, it’s important to note that commuting your pension isn’t the right choice for everyone. Before making any decisions, consider your individual circumstances and goals.
Here are some factors to keep in mind:
1. Age: If you’re nearing retirement age, commuting your pension may not be the best option. You may not have enough time to invest the lump sum payment and generate enough income to support you in retirement.
2. Health: If you have health issues that may impact your life expectancy, commuting your pension might be a good option. This will allow you to enjoy your retirement while you are still healthy.
3. Financial Situation: If you have other sources of income in retirement, such as a spouse’s pension or investments, commuting your pension may be a good option. Also, if you need money now to cover expenses or pay off debts.
4. Risk Tolerance: If you’re comfortable with taking on investment risk, commuting your pension may be a good option.
Ultimately, the decision to commute your pension is a personal one that depends on your individual circumstances and goals. It is important to carefully consider all of your options and speak with a financial advisor, who specializes in this area, before making any decisions. Why? Because you will need to:
1. Create a Financial Plan: Before you do anything else, create a financial plan that outlines your goals and how you plan to achieve them. This will help you make informed decisions about how to invest your lump sum payment.
2. Diversify Your Investments: To minimize risk, it is important to diversify your investments. Consider investing in a mix of stocks, bonds, and other assets to create a well-rounded portfolio.
3. Consider Annuities: An annuity is a financial product that provides a guaranteed income stream for life. Consider using a portion of your lump sum payment to purchase an annuity to ensure that you have a steady income in retirement.
4. Be Mindful of Fees: When investing your lump sum payment, be mindful of fees. High fees can eat into your returns and reduce the amount of income you have in retirement.
5. Revisit Your Plan Regularly: Your financial plan should be a living document that you revisit regularly. Make sure to review your plan at least once a year to ensure that you are on track to meet your goals.
➡️Reach out and learn more about if this option is a fit for you and what your plan should be. Enjoy your summer!