Are you looking to get a personal pension plan?
Having a pension plan is one of the oldest ways of building retirement money. Unfortunately, about 25% of American adults don’t have savings for retirement.
Your employer may set up pension plans, but you can augment your retirement money through a personal or private pension. It is a fund for pooling your contributions to generate income. You can enjoy these funds upon retirement.
What are the vital factors making private pensions unique? Continue reading below for four things to know about personal pension plans.
1. Personal Pension Plans Allow Flexible Contributions
Personal pension plan options offer flexibility concerning the contributions. If the employer and the employees settle the contributions in traditional pension plans, these plans allow you and almost anyone to contribute.
Your spouse can contribute to your personal pension and vice-versa. Parents can also get it for their children. Your employer, however, has no obligation to pay.
Click on the link to learn about the dynamics of women and personal pension.
2. They Come With Annuities
Personal pension plans also allow you to buy annuities. An annuity is a guaranteed income you can enjoy for a fixed term or life. In pension annuity payments, the taxes spread out over time.
It also provides more security for you or your loved ones. The downside with personal retirement pension annuities is the amount of money you get. Since annuities feature equal monthly payments, they may not be enough to cover a lifestyle increase.
The surrender charges may also affect your investment’s flexibility. These are charges you must pay whenever you withdraw money from an annuity.
3. The Magic Number Is 65
Are you asking, “when can I get my personal pension?” The magic number for personal pension plans in the U.S. is 65, the full retirement age. Despite the recent changes, some pension plans let you collect early retirement benefits by age 55.
The caveat of an early collection is your monthly payouts will be less than what you get when you’re 65.
4. It Comes with Tax Relief (Sometimes)
A personal pension plan has tax breaks depending on the state you reside. Most states will tax your pension income depending on your age and income. However, 14 states will not tax your pension.
Boosting Your Pension Pot
There are different ways to increase your pension pot. The most basic is to increase the sum of your pension payments. Look for part-time jobs to augment your income.
Look for more aggressive funds to boost the returns. Talk to a pension provider and ask if you can spread some of your money to high-risk, high-yielding funds.
Increase Your Financial Knowledge
Getting a personal pension allows you to increase your retirement money safely. You can also secure your family and avoid being a financial burden to your loved ones.
Continue increasing your financial knowledge through our other articles. We share helpful topics to help benefit your financial health.