No matter what age you are when you discover your pension will fall short of providing the income you need to retire, it’s a frightening moment.
If you have a good pension plan at work, there are no guarantees you will be receiving what you were promised. Many companies are turning their pension plans over to a federal guaranty corporation and they may pay as little as 50 cents to the dollar originally promised. If you are looking forward to retirement in a few years or you have several years before retirement, you have options to lessen the gap between what your pension income will be and the income you need to continue in the lifestyle you are accustomed to.
One of the first things everyone should do is check the income history Social Security has for you. Make sure it’s accurate. Be sure you will get all that you are entitled to. Don’t wait till you get that first check and find out it falls short because of inaccurate information. Correcting it can be a slow and long process.
Once you find out your pension will fall short, take steps immediately to remedy the shortfall. Plan to have your monthly expenses reduced so you need less at retirement and to free up more money, today, to save for your pension. Protect your pension from unplanned expenses. You may also have to re-evaluate your retirement plans. The most important step is to educate yourself on your options.
Reduce living expenses.
- Reduce what you pay in rent and take the difference and contribute to your pension savings.
- Move to a smaller home which will not only reduce your mortgage payment, it will reduce utility expenses. Take any cash from the sale to contribute to pension savings or put towards a larger down payment to reduce monthly mortgage payments.
- Evaluate your lifestyle. What expenses can be reduced or eliminated so that you can retire sooner and not have to take on a part time job.
Plan for unplanned expenses.
- Use projected life expectancy when making plans to reduce the pension shortfalls.
- Long term care insurance will protect your pension income from being devoured by the costs that go hand in hand with living longer.
Change retirement plans.
- Working a few years longer may provide you with the funds and time needed to reduce pension shortfalls.
- Semi-retirement may be necessary for a few years. Look into part time job options ahead of time.
- Change your retirement lifestyle plans to accommodate the decrease in planned retirement income. You may have to reduce the number of trips each year you planned on taking.
Be knowledgeable about your options.
- Read books and check the internet for pension information and options.
- Get advice from knowledgeable professionals. Find a reputable financial planner.
hen it comes to pension shortfalls you will need to be flexible, educated, and creative to reduce the gap between what your pension income actually is, and what your pension income needs are.
