When Pension Income Isn’t Enough: Top Strategies to Supplement Your Retirement

Pensions are a powerful tool for retirement. They’re like a sturdy foundation, giving you consistent income every month and helping you feel secure about the future. But, as with any good foundation, sometimes you need a little more support. Rising costs, healthcare expenses, and new goals often require extra income to make sure your retirement lives up to your plans.

If you’re wondering how to fill the gap when pension income doesn’t quite cover all the bases, there are strategies that can supplement your retirement and give you the peace of mind you deserve. Let’s explore the options that can help you create a comfortable, well-rounded retirement income plan.

Recognizing an Income Gap in Retirement

You’re not alone if you’re asking, “Will my pension be enough?” Many retirees face the same question, realizing that while a pension helps cover the essentials, it doesn’t always allow for everything they want—or need—to enjoy in retirement.

What’s an Income Gap?
An income gap is simply the difference between the income your pension provides and the amount you’ll actually need to maintain your lifestyle. For example, imagine you receive $2,000 a month from your pension, but your monthly expenses and goals add up to $2,500. That $500 difference represents an income gap.

Why Do These Gaps Happen?
Several things can lead to a gap between pension income and actual expenses:

• Rising Costs: Over time, everyday expenses tend to go up. Think about how much groceries, gas, and healthcare costs have risen in recent years.
• Unexpected Expenses: Health issues, home repairs, or even helping family members financially can impact your budget in ways that a fixed pension may not fully cover.
• Lifestyle Goals: Maybe you’d like to travel, explore new hobbies, or simply have a cushion for peace of mind. When we think about the future, it’s often these goals that add to our overall retirement budget.

Top Strategies to Supplement Pension Income

When it comes to filling an income gap, the right strategy can make all the difference. Here are three powerful tools that can help.

1. Indexed Annuities for Reliable Growth and Income
   • What It Is: An indexed annuity is a financial product that allows your money to grow over time, tied to the stock market’s performance but without the risk of losses in a down market. Think of it as a way to participate in the market’s gains while protecting your principal from declines.
   • How It Helps: Indexed annuities can provide a steady income stream, so you’re not solely dependent on your pension. For example, if you have $100,000 in an indexed annuity, you might receive an additional $500 per month, filling in that income gap.
   • Added Benefit: This growth is often tax-deferred, meaning you won’t pay taxes on it until you start withdrawing, allowing your money to grow faster.
2. Rolling Over an Inactive 401(k)
   • What It Is: Many retirees leave old 401(k) accounts sitting with previous employers. A rollover moves this money into a different account, such as an indexed annuity, where it can continue to grow.
   • How It Helps: By rolling over a 401(k) into an indexed annuity, you can grow this money securely with a reliable income stream for retirement. This means you’re converting a stagnant asset into one that actively works for you.
   • Key Advantage: A rollover allows you to take control of your retirement funds, aligning them with your goals rather than leaving them idle. This strategy combines growth with income security, giving you more to work with in retirement.
3. Indexed Universal Life (IUL) Policies for Flexible Income and Protection
   • What It Is: An Indexed Universal Life (IUL) policy is a type of life insurance that does more than just provide a death benefit. It offers three levels of protection: living benefits, tax-free retirement income, and a traditional death benefit.
   • How It Helps: With an IUL, you can access tax-free income in retirement, helping to cover any gaps without increasing your taxable income. Additionally, the living benefits allow you to access funds early in case of a major health event, so your retirement savings remain intact.
   • Why It’s Effective: An IUL offers flexibility, giving you access to funds when you need them most, whether that’s for covering a medical expense or supplementing your monthly income.

Choosing the Right Strategy for Your Goals

When it comes to building a solid retirement plan, it’s essential to think about both security and flexibility. Ask yourself:

• Do I prefer guaranteed income, or do I want flexible access to funds?
• How comfortable am I with some market participation for growth?
• What are my long-term health considerations and lifestyle goals?

Each option offers different advantages, and the right choice depends on what matters most to you. For example, if you prioritize consistent, secure income, an indexed annuity may fit best. If you want flexibility to adjust as life changes, an IUL can provide income with built-in protection.

Ready to Plan for a Well-Rounded Retirement?

A pension is a fantastic starting point, but ensuring it’s enough to cover all your needs can provide peace of mind. If you’d like to explore strategies that can fill the gaps and help you live the retirement you envision, schedule a complimentary consultation today. We’ll discuss your goals, answer your questions, and create a retirement income plan that truly supports your lifestyle.

Disclaimer

The information provided in this blog is for educational and informational purposes only and should not be considered as financial, tax, or legal advice. Indexed annuities and Indexed Universal Life (IUL) policies are financial products with specific benefits and limitations, and they may not be suitable for everyone.

Please be aware that:

• Indexed Annuities: These products provide principal protection but are subject to cap rates and participation rates, which can limit returns compared to direct investments. Early withdrawals may incur surrender charges and could be subject to additional penalties.
• Indexed Universal Life (IUL) Policies: IULs offer tax-deferred growth and flexible access to cash value; however, excessive withdrawals may affect policy performance and incur tax implications. Consult a tax professional to fully understand the potential tax consequences of policy loans or withdrawals.

The examples and scenarios provided are illustrative and may not reflect actual results. Individual results will vary based on specific circumstances, risk tolerance, and financial goals.

We strongly recommend consulting with a qualified financial agent at Wise Wallet Financial to assess your unique needs and develop a personalized retirement strategy. Neither Wise Wallet Financial nor its representatives provide tax or legal advice; clients should seek the guidance of a tax professional for advice specific to their situation.