From Kiplinger · · 3m
Retiring With a Pension: 7-Point Checklist for Lifelong Savers
Lifelong savers with pensions can confidently enjoy wealth using this 7-point checklist.
In brief
Lifelong savers with pensions can confidently enjoy wealth using this 7-point checklist. Lifelong savers with pensions should build investment plans, manage tax locations, prepare for RMDs, consider Roth conversions, address widow's penalties, plan legacies, and evaluate pension options before retiring. Originally…
Build an investment plan around your pension
A pension can significantly change your risk profile by providing reliable income that isn't dependent on investment portfolio performance.
Pay attention to tax location, not just asset allocation
Tax location matters more than asset allocation for retirees with investments in traditional IRAs, Roth IRAs, and taxable brokerage accounts.
Prepare for RMDs
Retirees with tax-deferred accounts must plan for required minimum distributions starting at age 73 or 75 depending on birth year.
Consider whether Roth conversions make sense
Roth conversions can create tax diversification but require careful planning to avoid higher tax brackets or large future RMDs.
Plan for the 'widow's penalty'
Surviving spouses may face higher taxes and lower income after one spouse passes, creating the 'widow's penalty' in retirement planning.
Don't overlook legacy planning
Estate planning includes wills, powers of attorney, healthcare directives, beneficiary designations, and trust arrangements for efficient inheritance.
Evaluate pension options before retiring
Pension choices like survivor benefits and lump-sum payments should be calculated based on spouse's age, health, and financial needs.
Retirement planning for pension holders
Lifelong savers with pensions should focus on confidently using wealth rather than just avoiding running out of money.
The 2% Club
People with pensions and over $1 million in savings are called the 2% Club, often hardworking frugal savers who prioritize saving over spending.
Roth conversions for tax diversification
Roth conversions can help create tax diversification across taxable, tax-deferred, and tax-free accounts for better retirement flexibility.
Tax implications of pensions
Pensions can create unusual tax situations where taxable income remains high despite retirement, requiring careful planning.
Legacy planning for heirs
Inherited retirement accounts face 10-year rules and tax consequences, especially for high-income non-spouse beneficiaries.
Pension survivorship options
Pension survivorship options include larger monthly payments for the retiree or reduced payments that continue to a spouse after death.
Pension lump-sum considerations
Lump-sum pension options depend on interest rates, pension financial strength, investment strategy, and legacy objectives.
Retirement planning mindset shift
The goal for lifelong savers with pensions is to confidently use accumulated wealth for life, purpose, and experiences in retirement.
What to remember
Lifelong savers with pensions should build investment plans, manage tax locations, prepare for RMDs, consider Roth conversions, address widow's penalties, plan legacies, and evaluate pension options before retiring.
