Step Two: Assessing your current assets
Your pension may not be sufficient to cover your entire annual income needs during retirement; therefore, your own assets may be needed to supply the difference. Do you have enough saved to provide the additional income needed? Is it enough to supply you additional income through retirement? These are questions that will need to be answered. You can use two basic rules of thumbs as a starting place to figure this out.
- Multiple by 252 – estimates how much money you’ll need in retirement by multiplying your desired annual income by 25. For example, if you want to withdraw $40,000 per year from your retirement portfolio, you need $1 million dollars in your retirement portfolio. ($40,000 x 25 equals $1 million.)
- 4% Rule2 – assumes your investments earn at least a 4% real return and provides the amount of money you can withdraw annually without dipping into your investment principal. Using the example above, if you retire with $1,000,000 in your portfolio, then you would withdraw $40,000 in your first year of retirement. ($1,000,000 x 0.04 equals $40,000.) In subsequent years, the amount to withdraw should be adjusted for inflation.
Step Three – Knowing your options
It’s important to know what your pension survivor benefit options are. Your personalized website inside Lockheed’s LM People, will allow you to estimate your pension benefits and see the variety of options available for your survivor benefit. Follow this path to get there: LM People > Pay and Benefits > LM Employee Service Center. Once inside, generate the reports to see the following survivor benefit options: Single Life Only, 100% survivor, 75% survivor and 50% survivor.
- Single Life Only – this is the amount you, the retiree, would receive for your lifetime and your pension payments would end at your death. This is the largest pension benefit available and provides no residual income to your spouse.
- 100% Survivor – this is amount you, the retiree, would receive for your lifetime and if your spouse survives you, then he or she would continue to receive the same pension payment until his or her death. This is the lowest pension benefit available, but provides the most residual income to your spouse.
- 75% Survivor – this is the amount you, the retiree, would receive for your lifetime and if your spouse survives you, then he or she would continue to receive 75% of your pension payment until his or her death.
- 50% Survivor – this is the amount you, the retiree, would receive for your lifetime and if your spouse survives you, then he or she would continue to receive 50% of your pension payment until his or her death.
Once you have gathered your pension survivor benefit options, calculated your current assets and needs, and determined your life expectancy, you’re ready to start analyzing your overall situation to see which survivor benefit option fits your best or you’re ready to find a professional to analyze it for you. Either way, at least you have the first three steps completed.
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Be sure and check back next week for more incredibly valuable information. Cheers!
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