4 Things To Know If You're Retiring With A Pension in The US

About this video

• Video Title: 4 Things To Know If You're Retiring With A Pension in The US
• Channel: Nathan Lee, CFP®
• Speakers: Nathan Lee
• Duration: 11:58

Overview

This video discusses four crucial factors to consider when retiring with a pension in the US. It highlights how pension plans have become less common, shifting the retirement saving burden to individuals. The speaker explains various payout options, tax implications based on state of residence, how pensions absorb investment and longevity risks, and the significant impact of inflation on fixed pension payments.

Key takeaways

• Declining Pension Landscape: Only about 15% of private sector workers have access to traditional defined benefit pension plans as of 2023, with a rise in defined contribution plans like 401(k)s.
• Pension Payout Options: Understanding choices like lump sum, 10-year certain, 10-year certain and life, 100% joint and survivor, 50% joint and survivor, and single life annuity is crucial, each with different implications for income, legacy, and risk.
• State Tax Impact: The state where you live in retirement can significantly affect your net pension income due to varying state income tax laws and potential pension income exclusions.
• Risk Transfer: Pensions absorb investment and longevity risks, meaning the fund is responsible for growth and sustained payouts, unlike 401(k)s where the individual bears these risks.
• Inflation Risk: Most US pensions do not include a Cost of Living Adjustment (COLA), meaning the purchasing power of fixed pension payments can significantly decrease over time due to inflation.