Pension Decisions – Risks and Opportunities

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Bill’s Story

Brian Weatherdon MA, CFP, CLU, CPCAAuthor, Speaker, Financial Planner.

Aligning your Wealth & Life to overcome fears andsecure your income, lifestyle, & comfort to age 105

Before hearing this story . . . .

• Continuing into these slides signifies you realize one person’s story cannot be representative of what everyone else should do. This story is personal and not in any way prescriptive for what you should do, nor for how your advisors may guide you.

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• Stories in this wider series capture different approaches to value and decisions in business, pension, savings, and the results for personal security, life income, and family estate.

• More information/insights at educational websitewww.GuaranteedIncome4Life.ca

• And 5-star rated book (Amazon, Kindle, bookstores)

“A Lifetime Of Wealth -- And How Not To Lose It”

Presumed he’d draw a pension• Bill was a hard-working person who felt he

would work to 65 and draw a guaranteed pension for life. Easy!

• He was conservative, preferring to avoid stock market risks and calamities that so often hit the news.

• While he could “commute” (personalize) his pension he wouldn’t expect to do this.

But a friend’s pension got hit!

• Bill’s friend complained their pension was being cut back 30%. Then Bill started hearing other stories in the news. Pension plans were falling by 20% and in one case a story of 80%.

• Bill got angry because he had always believed the pension statement was a promise: now it seemed nothing in the pension was actually guaranteed.

Digging further . . .

• He learned his own pension is under-funded. The employer won’t likely make up a shortfall. Government won’t either.

• He began to realize that today’s employees could become tomorrow’s losers. The future was beginning to look more scary than ever.

Reaching a professional advisor

• Bill found a certified financial planner to help clarify and guide a way through these worries.

• They evaluated pension risks and the advisor suggested Bill’s risk might be limited to 20% ...so he should be reasonably confident of receiving 80% of his expected pension income.

Yet “commuting” has risks too ...

• The advisor further pointed out that Bill was conservative. If Bill commuted his pension and invested the proceeds for guaranteed low returns, he’d be out of money by age 79.

• To create his own personalized pension plan Bill would have to pay himself less, or learn to invest for a safe and reliable income that would continue paying him for life.

And some risks, in either plan ...

• Whether Bill stayed in the pension plan or commuted to a personalized approach he would also want to address:

• What about fluctuating needs for Lifestyle goals?• What about inflating costs for future health care?• What if taxes rose, taking a greater bite from income?• What if a family crisis arose, needing financial help?• What if other unknowns were to arise?

• We cover these & more in other presentations, also in the book, the website & other resources (see final slide).

A key is “Life Income Mandates”

• Life Income Mandates is a process to align wealth management with the life you choose by creating perpetual and increasing income.

See http://www.guaranteedincome4life.ca/blog/life-income-mandates/

• Combining income from Dividends, Life pay-out annuities, Real Estate, Infrastructure, and other Fixed-Income can sustain high and continuing life-income with low/modest risk.

It’s a vital choice people will make

• Bill knows the pension plan has security even if it is underfunded; it will still pay some kind of income for the rest of a person’s life.

• But if there are other health considerations, or desire to leave a greater estate for his family, Bill could opt to commute his pension. Then he’ll need confidence in life-income mandates to support lasting or flexible income for life!

Ideas for your Retirement Lifestyle

• Would you phase your early steps into retirement?

• Early retirement can mean achieving our “bucket list” goals and living our dreams while we have maximum capacity to enjoy them.

• Mid-retirement can be a time of pictures & stories, less travel, lower spending, peace and contentment.

• Later senior years suggest high costs for health care and personal comfort/dignity; higher needs then.

Key questions to help guide your future

• What experiences do I most want to enjoy in my early retirement? And in my 80s, my 90s? Can I be confident that my pension plan – or a personalized plan – will safely align with this?

• How will I provide for emergent needs related to health, personal care, illness or frailty, family needs? Will my pension decision impact family – protecting them from my becoming a burden on them?

• Who can I reach to discuss any gaps in my planning? What resources can help me?

Resources to help . . .

• Certified Financial Planner working with pensions; chartered accountant; pension specialist able to fairly evaluate & document “both sides of the fence” whether you stay in the pension or commute it.

• Self-study (& subscribe), “Exit Strategies from a Pension” http://www.guaranteedincome4life.ca/blog/exit-strategies-from-a-pension/

• Self-study (& subscribe), “Life Income Mandates” http://www.guaranteedincome4life.ca/blog/life-income-mandates/

Resources to help get what you want

• Experience this website to help focus on your future: www.GuaranteedIncome4Life.ca

• Get 5-star book, Amazon/Kindle/bookstores: “A Lifetime Of Wealth – And How Not To Lose It” http://www.amazon.com/Lifetime-Wealth-how-not-lose/dp/1489579540/ref=sr_1_1?

ie=UTF8&qid=1380311791&sr=8-1&keywords=a+lifetime+of+wealth+--+and+how+not+to+lose+it

• Visit www.ALifetimeOfWealth.info