Thinking about cashing out on your defined benefit pension? Before you make a move, see these three reasons to stick with a defined benefit pension plan.
1. Easy to Manage
A defined benefit pension will have your employer hire an investment company to completely manage the pension assets. That company is also given the responsibility to ensure that employees receive the monthly payment they are entitled to. When a person has a defined benefit pension, they have no direct involvement in the management of their investments – and there is no need (ever) to make any investment decisions before or after retirement. At retirement you will receive a regular monthly “pay cheque” from your employer for life.
It is possible to earn higher returns from managing money outside a pension, but you need to ask yourself… “am I willing to trade off the security and simplicity for the potential to make more money?” As the first point alluded to, a defined benefit pension will give you a “pay cheque” the rest of your days (and maybe even your spouse’s, too). Some retirees want safety and peace of mind – not income maximization. Good cash flow management and risk minimization can be the focus for a stress-free retirement.
3. Lower Fees
Pension management costs are typically quite low when compared to other management sources. Even if your investments do better outside a pension, it’s the after-fee return that lands in your pocket.
Some reasons to consider actually taking the cash value of the pension: Maybe you expect a lower life expectancy for health reasons, or maybe the company is struggling financially? If not, leave the pension where it is, relax and enjoy your retirement.
For many people, retirement seems like a long way off. Although, with longer life spans and improved health care, it is important to start setting up a retirement plan earlier rather then later. It’s never too early to start saving for your retirement. Here are 4 tips to help you get started:
1. Start Early!
Many people in their 20s think that they are too young to start saving for retirement. This is untrue! The earlier you start, the better off you will be. By starting in your 20s instead of your 30s or 40s, you’ll be able to save almost double, if not triple, by the time you reach the age of 65.
2. Contribute to your 401(k)
A 401(k) is a retirement savings plan offered by employers to their employees. It lets people save a piece of their paycheck before taxes are taken out. This means you can invest more of your income without feeling it as much in your budget.
3. Manage Spending Habits
Learning how to manage money is one of the most important skills a person can acquire. It is essential to start acquiring money management skills at a young age and not waiting until retirement age. There are many websites and cell phone apps that help with money management.
4. Keep Working
This is one of the most realistic tips. Adults are healthier and living longer. If you enjoy your career consider working for a few more years before deciding to retire. If not, try reducing work hours or finding a less demanding job. This may mean less income, but if your mortgage is paid off and are financially savvy, then this is definitely a good option.
Unexpected car repairs, the holiday season, birthdays – it can seem almost impossible to build up a solid emergency fund. But with a little discipline and elbow grease, your goal can draw closer than ever before. Here are four tips on saving for your emergency fund.
1. Put a Firewall Around It
Do not put your emergency fund in your regular checking or savings account. It will be far too tempting to spend a little here and there – especially when the holiday season rolls in. Create a separate account linked to your daily accounts and make use of the ability to make transfers when necessary. The easier it is to access, the easier it is to spend – keep that in mind.
2. Set It on Auto
Think of your emergency fund as any other monthly cost. Sure, it may seem like painful expense at first, but if you deposit a preset amount each month automatically to your fund, you will quickly become comfortable with the expense. And after all, these payments are going towards your peace of mind.
3. Strictly Define Emergencies
What is a legitimate emergency to you? Define it, stick to it and don’t give yourself any wiggle room. A kitchen appliance breaking down, broken water heater – those are emergencies. A big time can’t-miss sale at the Bay? A new sound system for your car? Although tempting, these are the type of non-emergency situations you need try to avoid.
4. Restock with Found Money
If you are forced dip into your reserves, use gifts and raises to refill the pot. Tax season is a great time to restock. The average tax refund in Canada floats around the $1,000 mark, a great starting point (or replenishment) to any emergency fund.