Personal Pensions create an income stream you cannot outlive
Pensions have not gone the way of dinosaurs. Although pensions with a private company are rare, you now have the ability to create your own lifetime personal pension to pay you a steady stream of income — unaffected by market volatility — and provide you with additional benefits that old-style pensions never offered.
Social Security is a pension, and unless you are married, the benefit ends at death. Public pensions are offered to Federal, state, and local employees. Many of the public pension plans are being squandered by politicians. And only a few private companies still offer pensions. However, when pensions are offered at almost every level, benefits seldom (if ever) extend beyond the basic income stream that either ends at death or pays a reduced amount to a surviving spouse.
In setting up a Personal Pension, you have the ability to generate benefits beyond basic income:
Lifetime Guaranteed Income
The income benefit can be activated at anytime and is not dependent on your age such when applying for Medicare and Social Security. A common strategy is to ladder the income stream activation dates based on other financial factors, inflation, and even health needs. Funds for a personal pension can be sourced through cash or a qualified plan such as an IRA or 401(k) plan.
Access Clause
You have the ability to draw additional funds from the account, in addition to the income, for emergency purposes. Sometimes these additional withdrawals might decrease the income draw, but in this case cash is king when needed.
Compassion Clause
These can be structured to provide additional income or cash for healthcare issues. Some personal pensions might have an impairment multiplier that doubles income when a certain number (usually 2 of 6) ADLs — areas of daily living — can no longer be performed. Others will make 100% of the cash balance available for cases of home health care and long-term care needs in a nursing home.
Start/Stop Income
Income can be stopped at your request. Maybe in retirement you decide to work or consult part time and do not have a need for the income. You can simply stop and restart the income at will. This is not the case with other pension plans.
Higher Payouts
Personal Pensions will usually pay out a higher level of income than a traditional IRA account or 401(k). The rule of thumb with such accounts is to withdraw no more than 4% to protect the account from the volatility of markets. In the personal pension strategy, account payoffs often exceed 6% and can be has high as 9%.
Personal pensions are nearly bulletproof strategies to protect your retirement nest egg to provide a dependable income for life. With additional benefits in the areas of healthcare and cash emergencies, these tools far overpower the traditional pensions offered through private companies and the public employee sector.