How to Use a Self-funded Pension Plan to Secure Your Retirement
Don’t Outlive Your Income
A Contract Between You and an Insurance Company
Are you concerned about outliving your income and struggling to make ends meet when you retire? A Self-funded Pension can help put those fears to rest. It is essentially a contract where you pay an insurance company a premium in exchange for assets you can use to save for retirement and/or cover long-term care during retirement.
Deferred Self-funded Pension Plans
There are two types of self-funded pension plans: deferred and income. Deferred Self-funded Pension Plans are designed to help you save for retirement, and can be fixed or variable.
- Fixed deferred plans are based on a fixed interest rate.
- Variable plans are based on investment portfolios consisting of bonds, stocks, and/or money market instruments.
For all deferred self-funded pension plans, you can defer taxes on the account until you withdraw money. You can also choose to have the savings dispersed to you in lifetime payments.
Income Self-funded Pension Plans
Income self-funded pension plans are mostly used to pay bills during retirement. You pay the insurance company a premium, and they give you an income. Depending on the plan, this income will continue through your lifetime, your partner’s lifetime, or the number of years laid out in the plan. Like with deferred self-funded pension plans, the payments can be fixed or based on investments.
How Much Money Do I Get?
If you have a deferred plan, the amount of money you get depends on your saving strategy. If you are in a higher tax bracket and save your money for a long time, you will benefit more from the tax deferral. Income taxes kick in once you withdraw the money. With income self-funded pension plans, the amount the insurance company pays out to you depends on factors like age, gender, the interest rate on the plan when you buy, and how much you initially pay for the self-funded pension plan.
Advantages of an Self-funded Pension
Why should you consider an self-funded pension plan? Running out of money following retirement is a real concern for most people, and getting an self-funded pension plan is a great way to be sure you’ll have some sort of income coming in every month. It is also a smart way to add to your existing retirement savings, especially if you’ve maxed out the amount you can add to an IRA or 401(k). Self-funded pension plans even have benefits after your death, since many plans include death benefits and ways for you to pass on assets to your heirs.
To learn more about a carrier's plans you can give us a call at 1-800-913-3416 and we’ll be happy to help you. Of course, there’s no charge or obligation for our assistance.