Understanding Your Pension Plan

by:  Financial Planning Committee

According to a recent survey by Fidelity Investments that included Americans who currently have pension plans, over 71% did not have a thorough understanding of how those plans work. Despite this widespread lack of understanding, over half of those surveyed will depend on their pension plan benefits for living expenses in retirement.

Although the number of Defined Benefit Pension plans in America has been steadily decreasing over the last three decades due to their complexity and the cost to administer them (according to the Employee Benefit Research Institute, only 30% of Americans can count on traditional Defined Benefit Pension plans), there are still over 42 million Americans who do participate in these plans. Given that pension plans continue to be a critical source of retirement income, it is important to have an understanding of your plan benefits and options and how to most effectively utilize them as part of your overall retirement strategy. While the plan itself determines the pension payment based on years of service and salary over the course of employment, there are still areas in the plan where the employee has control, such as payment structure and survivor benefits if your spouse were to outlive you.

A few key areas JNBA analyzes when looking at a Defined Benefit Pension plan are:

• Vesting status
• Payment structure
• Tax implications
• Estate planning

As a trusted Wealth Advisor providing comprehensive financial planning to our clients, we are always available to assist you in evaluating your pension options. If you have additional questions or would like further clarification on an analysis that we have previously done for you, please contact your Senior Wealth Advisor.

Ackerman, R. (2011, July 28). Most Americans in the Dark about Their Pensions. Financial Planning. Retrieved August 7, 2011, from http://www. financial-planning.com/news/fidelity-investments-pension-retirement-benefits-2674441-1.html?ET=financialplanning:e3600:2160353a:&st=email&utm_ source=editorial&utm_medium=email&utm_campaign=FP_Weekend__072911

(2011, January 31). Taking on Retirement’s New Normal. Fidelity Investors Publications. Retrieved August 7, 2011, from https://guidance.fidelity.com/viewpoints/ take-on-retirement.