Should You Rely Only On Your Pension?

Relying  Only On Your Pension

First Published Date : March 20, 2011 ADawnJournal.com

Many retirees, along with saving a bit of money, rely heavily on their pension fund to finance them during their golden years. However, is this really a good idea? If the recession has taught us anything it is that pensions are not always a safe. Many investments were made, with allegations of fraud, which caused pensions across the United States to be completely lost.

This should show you that pension plans are not always safe and you should look at finding alternatives to making sure you have enough money when you retire. Do you really want to put all your eggs in one basket with your retirement? No you don’t. What should you do to ensure you don’t just rely on your pension?

The first thing you should do is start saving from a very early age. If you start saving when you are 20, then you can have a lot of money. Save $2,000 every year from the age of 20 to 65, you will have saved $90,000 easily. That is if you never add anything else to your savings. If you increase the amount you save every single year by 10 per cent, you can end up saving a lot of money.

The next thing you can do is to make your own investment portfolio. Do not rely just on your pension fund portfolio because you really don’t have much of a choice about what it is invested in. Before the financial crisis, pension funds only invested in AAA rated stocks, which were considered very safe. Turns out, many bad investments got AAA ratings and when everything collapsed, many lost their entire pensions. So, you should make your own investments because you have control. You can ask questions, you can make the decisions and you can ensure what you invest in is safe. Having an investment portfolio and a pension portfolio is not out of the ordinary. It is quite common and many who did this ended up weathering through the financial crisis much easier than others.

As you get closer to retirement, begin to cut your expenses as well. Sell that other car, pay off your mortgage early, sell anything you don’t need. Doing that can free up some extra cash, even thousands of dollars worth, that you can put in your retirement fund.

When you retire, you will also find that you suddenly have a lot of time on your hands. You can use that time to your advantage by pursuing hobbies that will make you money. If you are good at leatherwork, make some products that you can sell at farmer’s markets. If you are good at painting, make it a hobby that can bring in money for you. In the years leading up to your retirement, practice your hobby so you can hit the ground running once you retire.

If you are going to rely on your pension fund only, you are taking a big risk. This is why you should always have some backup plans in case you suddenly find your pension is gone one day.