How to Create Your Private Pension Plan

Updated on March 30, 2015

wedding photographyBy Bill Demaree

Unfortunately, pensions are largely a thing of the past, placing more responsibility on individuals than ever before. So we must be smarter about our money. 

Cash was king. Now income is king. Rightfully, people are scared about running out of money in retirement.

Securing steady retirement income – and peace of mind – requires a shift in financial thinking from an accumulation mindset, to one of preservation. Even “accumulation-style” assets like stocks, gold or silver, must be converted to income.

The purpose of money dictates where you put it. So if your money aims for peace of mind through steady income, create your own private pension plan.

Seek Advice

I highly suggest working with a professional advisor who uses a holistic approach, considering every aspect of your life and finances, to personally tailor your financial plan. It’s also essential for them to be credible, and someone with whom you relate.

I’m the same age as many of my clients. So I’m kind of in the same boat as they are, however, I keep working because I’m deeply passionate about helping them. 

My goal is to help people experience happiness in their lives, which for most means retirement. I understand that, so we relate to each other, sharing common ground. And honestly, most people don’t care how much I know until they know how much I care.

Additionally, make sure an advisor is credible and comes highly-recommended. Ask friends and family for suggestions, and check with the Better Business Bureau. Your advisor must earn your confidence. 

Lastly, you don’t want to be limited to any one company’s offerings. So seek an independent advisor who’ll scour the market to find solutions that best fit you.

Get Acquainted

Work with your advisor to identify your needs and goals. They’re key inputs for building your private pension plan.

For instance, are you going to stay in your house or downsize? Will you move to Florida? Do you want leave a financial legacy for your children? Is helping grandchildren with college important? These answers shape your plan.

I like to get involved with my clients by asking lots of questions. Do they go to church? Are they charitable? Are there any special needs situations, like an autistic grandchild? Do they love dogs? Cats? What’s their favorite food?

Your advisor should get to know you so they can focus on what you want to accomplish!

Build the Plan

Your private pension depends on many factors, time being a crucial one. The older you are, the more conservative you should be, because you don’t have recovery time. 

The plan should consist of fixed products that protect the principal and avoid risk, especially for those near retirement. However, if you want to participate in the market, you can have your cake and eat it too with fixed index annuities. These products should form the foundation of your private pension, and there are many to choose from.

At their core, they can offer both principal protection and growth. You can gain when the market appreciates, but won’t lose because the principal is guaranteed.

Fixed product fees are usually low, but carriers want a time commitment. Also, be mindful of management fees and remember the money isn’t purely liquid, but distributed on a schedule. All carriers have features and advantages to consider – one size doesn’t fit all. It depends on your needs.

Since your private pension’s foundation is illiquid, another portion of the plan should be liquid funds for use as needed. Options include money market accounts, savings accounts and more.

Social Security can be another income source in your plan. There are many considerations here, but a rule of thumb is that it pays to delay benefits as long as possible. Working with your advisor on Social Security is critical.

Common Sense Rules

Know the laws and how they apply to you because mistakes can be costly. With proper knowledge and expert guidance, you can employ your money to serve you.

I think of this as common sense planning. If built right, your private pension plan can provide steady income, plus reserves for “rainy days” and emergencies, while also being tax efficient and delivering peace of mind.


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