Taking My Own Advice:
My Personal Pension Review Surprise
October 13, 2017 - It doesn't come naturally for me to take issue with one of history's most prolific writers. But I recently went through a pension review process that exposes one area where a famous Irish author/poet/playwright's point of view can be challenged. At least partially.

"The only thing to do with good advice is to pass it on.
It is never of any use to oneself."

- Oscar Wilde -

Oscar Wilde's philosophy notwithstanding, I recently gave myself some good retirement income advice which can only be viewed as useful. Very useful. Advice so good, in fact, I would be remiss if I failed to "pass it on" to others.

Maybe my story can help you, too.


In a world long ago and far away, long before I discovered my current life's passion of helping others secure their financial futures, I was a public schoolteacher and basketball coach. It was my first chosen profession out of college and what I thought I wanted to do for a living.

Like so many others with career wanderlust, though, I ultimately decided a change of scenery was in order and sought other opportunities in the business world. Not before logging 5.1 years of service credit in the State Teachers Retirement System (STRS), however. Just enough to qualify for a small pension.

Very small.

Because my Final Average Salary (FAS) was so comparatively low and my service credit just above the minimum, my projected age 65 Single Life Annuity was only $1,303 per year.

In the ensuing years since I left teaching, because I could focus on other pension, 401(k) and SEP IRA opportunities as my career unfolded, my school pension wasn't anything I gave much thought to. In the back of my mind, while I knew it was there, I accepted it wasn't going to be the retirement income solution to all my dreams.

Decisions Decisions

But while it's easy to be dismissive of a retirement projection that seems inconsequential compared to Social Security and other anticipated retirement cash flows, wise future retirees will always want to do everything they can to maximize their guaranteed future income and I'm no exception. "It all adds up," as they say.

So, I challenged myself to see if I could find a better option.

Turns out, after a little research, I walked away from my self-counseling session pleased with what I discovered.

Although I'd never do this with any client other than myself, I'm taking the liberty of sharing with you my own personal Annual Statement from my teaching days of yore. Here you can see the anticipated $1,303 per year beginning at age 65 and the account value of $40,484.91.

One's Account Withdrawal Value is the lump sum value of the pension which is available for immediate withdrawal without penalty after age 59 1/2. These funds can also be rolled over into another retirement account for individual investing purposes or converted to a fixed or indexed annuity outside of the plan.

This particular 401(a) plan never offered any alternative investment options. While all retirement plans have similar features, each one is unique and participants are bound by the law and the rules of the plan that govern the one they're in.

Seeing Double 

Putting on my Retirement Income Certified Professional® hat, I performed a comprehensive review of the guaranteed income solutions available to me as a licensed and appointed agent in order to perform a true "apples to apples" comparison.

Simply put: If I could find something commercially available for $40,484.91 that would pay MORE than $1,303 a year, why wouldn't I initiate a transfer?

That's when I got the pleasant surprise.

By rolling my account balance into an income annuity with guaranteed minimum withdrawal privileges, I discovered I could more than double my guaranteed minimum annual income to $2,669 per year for as long as I live. The contract, issued by a highly rated life insurance company, also carries the added bonus of a death benefit should I die prematurely. A feature my school pension lacked.

Let's Review
Choice A 
Do nothing and receive $1,303 a year for life.  
If I die prematurely, my beneficiaries receive nothing.
Out of pocket cost to me = $0 
Choice B

Roll my balance into a life annuity that pays a guaranteed $2,669 a year for life.

If I die prematurely, my beneficiaries receive a death benefit.

Out of pocket cost to me = $0

I also considered an "apples to oranges" comparison, Option C, where I would roll my balance into an account of managed funds and deal with distributions later. But having already survived The Great Recession and with the stock market at an all-time high, I never seriously considered this alternative. If I were 30 or 40 years old maybe. But as one gets closer to retirement and the time horizon until withdrawal of assets decreases, conservation of funds becomes ever more crucial and a shift toward secure, guaranteed income ever more prudent.
Like Finding Buried Treasure

While I can't promise every review will yield comparable results, I would encourage you to call to let us review your situation if you want to make sure you maximize your guaranteed retirement income. Who knows? You might have some potential increased retirement cash flow just waiting to be unearthed.

I recently reviewed the pension projection for another client/friend of mine and could confirm that his existing pension was far superior to anything available outside his plan. In that instance, the review process was worthwhile since he left reassured that keeping his existing pension was the smartest choice.

So next time you look at your retirement savings or defined benefit statement, or if you are at that point where you need to weigh your retirement fund options because of a job change or upcoming Required Minimum Distributions (RMDs), let us know how we can help. Whether it's $40,000 or $40,000,000, we can evaluate your guaranteed retirement income position and make the appropriate recommendations even if that recommendation ends up being "Stick with what you have."

Thank you for the opportunity to be of service and best wishes for continued success in your personal and professional lives,

Dan Finn, CPCU, MSSC™, RICP®
Master's Certified Structured Settlement Consultant™
Retirement Income Certified Professional®

NOTE:  This newsletter is presented for educational purposes only
using material freely available in the public domain and should

not be construed as tax or legal advice. All rights reserved.

Buried money image courtesy of sdmania at FreeDigitalPhotos.net 

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The Finn Financial Group is a full-service, specialty planning firm with a commitment to ensuring the long-term financial stability of its clients. We believe this can best be achieved through a stream of guaranteed, tax-advantaged payments carefully tailored to each individual's specific needs. Our diligent work has resulted in a long list of satisfied clients across all lines of advocacy and a high degree of trust. 


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