Rolling Over Your Pension Plan is a Smart Way to Maximize Your Retirement Income

Rolling Over Your Pension Plan is a Smart Way to Maximize Your Retirement Income

Apr 30, 2023

Rolling over your pension to a fixed index annuity can maximize your retirement income, offer much more control and flexibility, without risk of market volatility or loss. Pension plans offer a secure retirement income that you can count on.  They typically use the lowest paying annuities as their investment vehicles.  This article will discuss a better way to get that guaranteed retirement income, but how to get a lot more.  Like getting higher interest rates, having more control and flexibility in your retirement account.  And how to not lose your pension benefits to your company when you pass away, but be able to pass that on to your loved ones in the form of a death benefit.

Rolling over your pension plan to an IRA Fixed Index Annuity can increase your retirement income and give you more control over your pension. 

Downside of Pension Plans
The Problem with Low Interest Earned in Most Pension Plans
Pension to IRA Rollover: What is it and How does it Work?
Fixed Index Annuity Advantages Over Pension Plans
Leaving Money to Your Beneficiaries
Fixed Index Annuities Flexibility Compared to Pension Plans
How to Rollover Your Pension Plan to a Fixed Index Annuity
Common Misconceptions About Fixed Index Annuities

Downside of Pension Plans

• Low interest rates received (typically 1-3%)
• Low income during retirement because of the low interest received
• If company fails, employees may not get full benefits
• Very inflexible
• Cannot tap into the pension for extra money for emergencies or unexpected needs
• Income typically stops after pensioner’s death
• No death benefit to take care of loved ones after death of pensioner

‍Rolling over your pension plan can mean earning higher income throughout your retirement years. Having a comfortable, yet secure retirement income, is important to all retirees.  One of the biggest challenges is the low interest earned in most pension plans. What most people don’t realize is that pension plans usually use traditional, old style, low interest earning annuities. This article will explain why rolling over your pension plan to a Fixed Index Annuity is a smart move.

Both traditional IRA rollover and Fixed Index Annuities as an alternative retirement savings option will be discussed. Also discussed are the benefits of Fixed Index Annuities over traditional pension plans: such as the opportunity to earn higher rates of interest, leaving money to your beneficiaries, Fixed Index Annuity guarantees, and the flexibility of some Fixed Index Annuities compared to traditional pension plans which would allow you to take more money out when needed.

Rolling Over Your Pension Can Dramatically Increase The Interest You Get

Most pension plans offer low interest rates, leaving pensioners getting less income during retirement. These low interest rates (typically 1-3% a year) often do not keep up with inflation, much less offer a chance for growth.  With the current economic climate, it is difficult to find a pension plan that offers a high enough interest rate to provide a comfortable retirement. This is where Fixed Index Annuities come into play. They have many of the same safeties as traditional pension plans, such as principal protection and guaranteed lifetime income, but have historically earned much higher interest rates.

Rolling Over Your Pension to an IRA: What is it and How Does it Work?

A traditional IRA rollover is when you move funds from one retirement account to another without incurring any tax penalties. This is the main tool used to move away from underperforming retirement plans for those who are looking to maximize their retirement savings. A rollover is usually done when an individual leaves their job and wants to move their pension plan to an account with better returns.  However, usually rollovers can be done at any time, including while still working at the company.

In a typical IRA, your funds can be invested in stock or bond mutual funds.  These will give you the potential for higher returns which will result in higher income when ready to take money out. But the stock and bond markets  will expose you to market volatility and the potential of losing a large portion of your hard-earned nest-egg when you can least afford to lose it.  This option is best suited for those with highest risk tolerance and multiple sources of retirement income so they are not as reliant on the pension savings.

Below we will discuss what might be the best of  best of both worlds. You can have the typical safeties of pensions, like not being affected by market volatility and knowing you have a stable source of guaranteed retirement income you can depend on. However, at the same time being invested in the stock market where you have the potential to earn higher interest.  Earning higher interest, while having the guarantees of lifetime stable income with no market volatility, can give you the peace of mind of knowing how much income you can depend on, while having the chance to have a higher one without any downside risk.

Fixed Index Annuity Advantages Over Pension Plans

• Potential for higher interest rates, while having a guaranteed a minimum interest rate.
• Potential for higher income throughout retirement because of the higher interest rates received.
• Same guarantees as pension plans such as your account being fully protected from market volatility and downturns. Your savings and all interests earned are “locked-in” and never lost to market crashes or downturns.
• Guaranteed lifetime income without having to turn your money over to your company or an insurance company.
• Flexibility to take additional money out, besides your monthly income stream, for emergencies or unexpected needs.
• Death benefit for your loved ones.
• Option to purchase additional benefits such as nursing care inside your FIA.

Fixed Index Annuities are an alternative retirement savings option that provides a guaranteed minimum interest rate. However, besides the minimum guaranteed interest rate, Fixed Index Annuities allow you to put your money into different indices that are linked to a market index, such as the S&P 500. The interest rate is based on the performance of the market index. The key difference between the indices in a Fixed Index Annuity and a traditional IRA or 401K is that in fixed index annuities your pension savings and all interests earned in prior periods are guaranteed against being lost due to market downturns. You will never have to worry about market crashes, while still having the opportunity to earn the higher interest rates that only the markets can offer.

As an example, let’s say you invest $100,000 in a fixed index annuity and over the next couple of years that investment earns $30,000 in interest for a total of $130,000 in account value. Then let’s say the index goes down by 40% over the next year. In a traditional IRA your account value will go down by 40% from the $130,000.  That will NEVER happen with a Fixed Index Annuity.  Your original investment and all interests earned in the past are “locked-in” and protected from market downturns.

Fixed Index Annuity Allocated In The S&P 500 Index (40% PR in Blue) With Downside Protection Compared to The S&P 500 Index Mutal Fund (S&P 500 in Red) With No Downside Protection

Roll Over Your Pension So That You Can Leave Money to Your Beneficiaries

Income payouts from a pension plan typically stop after the pensioners death, but Fixed Index Annuities offer the option of leaving money to your beneficiaries. This means that your loved ones will receive a lump sum or periodic payment after your death. This is an important consideration for those who want to ensure that their loved ones are financially secure after they pass away, or that they want to leave something behind as part of their legacy.

Fixed Index Annuities Flexibility Compared to Traditional Pension Plans

Another flexibility of Fixed Index Annuities compared to traditional pension plans is the ability to treat it similar to a traditional IRA or savings plan. You can set up periodic (say monthly) payments like a traditional pension plan, but many Fixed Index Annuities give you the option to take additional funds out if emergencies come up, or for any reason, just like a typical bank savings account or IRA’s.  Most pension plans do not give you this option.

Rolling Over Your Pension Plan to An Index Annuity Is Easy

Contact us to discuss if Fixed Index Annuities are right for you. We work with dozens of top-rated Fixed Index Annuity companies giving the option of the best to fit your individual needs. We will provide you with a free analysis, as well as, provide you with a detailed illustration tailored made for you based on real historic returns. This will give you an idea of how much income you can expect throughout your retirement. You can compare this side by side with the income your pension plan is offering you. After you accept the income option offered by your company it is usually too late to roll over your pension. When you are ready, we can handle the complete roll over process to make sure it is done correctly.

Common Misconceptions About Index Annuities

There are several common misconceptions about Fixed Index Annuities. The first is that they are complicated and difficult to understand. The truth is that Fixed Index Annuities are relatively simple and easy to understand. The second misconception is that they are risky. While all investments carry some degree of risk, Fixed Index Annuities offer guarantees that protect your investment from market volatility, and are considered a more conservative retirement savings and income option that still allows you the opportunity for growth and stronger income.

Rolling Over Your Pension to an Index Annuity is a Smart Move

Fixed Index Annuities offer a guaranteed minimum interest rate, potential for strong and competitive interest, tax-deferred growth, leaving money to your beneficiaries, principal and all interests earned are “locked-in” and protected from market downturns, flexibility, and peace of mind for your retirement savings. If you are looking to maximize your retirement savings, contact us to learn more about Fixed Index Annuities and how they can benefit you.  Let’s us provide you with a free detailed illustration, based on real historical interests earned, and the income you can expect during your retirement. You can compare it directly with what your pension plan is offering you.