Don’t Delay, Start Today

Bren Sheriff
Bren Sheriff

Don’t Delay, Start Today

Retirement planning is a crucial financial journey, but the path looks very different depending on whether you have an employer pension or not. Understanding these differences can help you prepare confidently for your golden years.

Workers with employer pensions enjoy a defined benefit plan, meaning they can expect a predictable monthly income for life, typically based on years of service and final salary. This can relieve a lot of the pressure to save aggressively, as the pension acts as a reliable income foundation. However, these workers should still save through additional vehicles like IRAs or 401(k)s to cover healthcare costs and inflation, and to maintain their lifestyle. Experts suggest that even pension holders consider saving an additional 10–15% of their income annually.

In contrast, workers without employer pensions must take full responsibility for building their retirement nest egg. Without a guaranteed monthly check, they rely entirely on personal savings, Social Security, and other investments. These workers should ideally save 15–20% of their income throughout their career. For example, if you aim for 80% of your pre-retirement income and currently make $75,000, you might need roughly $60,000 per year in retirement. Over a 25-year retirement, that’s $1.5 million in total — a daunting figure if not tackled early.

Dollar-wise, the difference is significant. A traditional pension can be worth $500,000 to $1 million in today's dollars. Someone without this benefit must accumulate that entire amount through disciplined saving and investing. For instance, a worker with a $3,000 monthly pension benefit might need only $500,000 in personal savings to supplement it. Meanwhile, a worker without a pension may need $1.5 million or more saved to generate a similar total income, assuming a 4% annual withdrawal rate.

Regardless of pension status, both groups should focus on maximizing Social Security benefits (by waiting to draw their benefits after age 70), reducing debt before retirement, and considering healthcare costs, which can easily exceed $300,000 over retirement. Especially, if you become incapacitated and need long-term care.  Remember, purchasing insurance now can help you meet your care expenses in the future and should be a part of your retirement planning.

Start by calculating your expected lifestyle expenses and identify all potential income sources. Workers with pensions can be more conservative, but should still maintain an emergency fund and investment cushion. Those without pensions must be more proactive, prioritizing tax-advantaged accounts and regular portfolio reviews.  Call on an expert to help you, that’s our purpose.

Retirement is a personal journey — one best navigated with a clear plan and steady commitment.   You will thank yourself later when you are ready to retire and you know that you can do so without fear of financial hardship.  Don’t delay, start today.

THIS WEEK’S QUIZ: What is the best retirement plan for you?

Answer to last week’s quiz: You may not want a person as the beneficiary of your life insurance policy in the following situations: If your intended heir is a minor child, a person with special needs, or a person who is financially irresponsible, name a trust (e.g., a revocable living trust or special needs trust) instead of a person.

You may also consider not naming a person a beneficiary of your life insurance policy for credit/tax reasons or if you want to make a charitable contribution.  Need help, call me.

 

To get a more detailed answer to last week’s QUIZ question or for any financial questions that you may have, please contact me: 773-817-0601 or basheriff1@gmail.com

Disclaimer: The illustrations presented in this column are not, nor are they intended to be, legal, financial, or any other licensed professional advice, you should contact the licensed professional of your choice for advice on your individual situation.

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