Pension is a deferred compensation for employees who worked in government or private companies. You will receive monetary funds depending on the number of years you have been working. Some received it as early as 50, 55 or 60 years old and perhaps could even be earlier in some pensioners.
What if, in some unforeseen circumstances, the government and companies go bankrupt, do you have other sources of income coming in?
It is a good program, like many others believed but it’s not perfect and it isn’t enough specially if you are living in countries with very high cost of living. Some governments and companies have encountered so many problems that some of them are unable to fulfill their obligations.
In the past, (also happening today and possibly in the future) we saw companies and governments gone bankrupt and were not able to fulfill their obligations and pay their beneficiaries. Many of these pensioners have waited for so long only to find out that they will receive nothing on their retirement. Additionally, many of these retirees don’t have enough or no other savings or investments and have not prepared themselves for their retirement. They don’t have other sources of income when they retire and rely solely on their pensions.
The problem I have with the pension scheme as an employee is three fold!
1) Governments, companies, and corporations want you to work for them until you retire, then that’s the time you will receive your deferred compensation when you stop working.
2) You don’t have any control as to where your funds are invested and don’t know its actual returns if you don’t investigate.
3) Finally, it’s not an absolute certainty that you will receive something when you stop working if something goes wrong with the government and those companies.
Others unfortunately passed away early and didn’t have a chance to enjoy their retirement benefits.
Hence, do not rely on your pensions.
Now more than ever we have so much opportunity to improve our finances and not rely solely on pensions. The Internet and the digital age has given us so much, that information is now accessible to anybody.
Millennials have the greatest opportunity especially if they work and start investing early. They may not need to work till they’re in their 40’s, 50’s more so in their 60’s.
Accumulate Assets not Liabilities
Look for other sources of income and accumulate assets that produce income such as dividend stocks, real estate (Rental Income), Bonds and notes (interest), and intellectual property (royalties) to name a few. On the other hand, embrace frugality and minimalism. Limit or cut down your liabilities.
Once you have accumulated enough assets to support your lifestyle then you may not need to work till your pensionable age.
Work will be much more fun because you don’t need the money. You can now do things that you are very passionate about and you’ll soon find out that your options are limitless.
More often than not when one is financially literate they not only look after their financial well-being but they tend to protect their very own asset, their personal health as well. They eat right and are physically active. They visit the gym regularly.
Since they look after their well-being, it’s no surprise that they reach pensionable age. The pension that you will receive is already a huge bonus on top of your passive income.
MY FINAL THOUGHTS
Pension scheme is a good program but it’s not always enough. Look for other sources of income. Accumulate income producing assets that will supplement your pension.
This is even more important in countries where socialized healthcare is not provided due to healthcare issues encountered when we are getting old.
Are you close to retirement age? In your opinion, is your pension enough to cover all your daily living expenses? If not, what other sources of income to supplement your pension?
Let me know in the comment section below.
When economy goes down pension may go down too. . We may end up having nothing in the end.
Well said Geri. If anyone thinks it’s secured, they may end up a rude awakening when something happens to the economy. The safest way to prepare for your future is now. Thank you for your comment.
I totally agree with your thoughts about the pension scheme, hence I opted for the RRSP Group plans investing in mutual funds. Although locked-in, I personally have control of the contributions given by my employer and myself (if I wanted to top it up) & will solely depend on my own risk tolerance when it comes to investing. Pensioners, nowadays, are still lucky that there are still funds from the Generation X & Y’s contributions. We should start thinking now if there will then be enough contributions by the Millenials to support the government pensions 2 decades later, and that… Read more »
Thanks for leaving a comment Mae. Anything that is planning for the future and using tax sheltered accounts is very smart.
Hi rommel. I invested in several insurance companies aside from government security system. So i can have different sources of pension. My husband also has his own pension plans. So I guess that will suffice.
Hi Jackie. Thanks for your comment. That is a very smart move and I’m glad that you’re doing that too.
Nice blog brod Rommel! Very helpful..Thanks for inviting me.I’m a fan now…wanna read more! God bless! 🙂
Thank you for leaving such a delightful comment sis Peewee.Keep in touch.
Thank you for inviting me on your blog Rommel. What you wrote is true. I have first hand experience from a person close to my family. In fact it’s really close to home. If you heard about what happened to Enron, a big energy company in Houston. A lot of those people lost their retirement money. Some have to work past their working age. Sadly, some just end their life for they cannot endure the thought of losing everything they have worked for. It was not just the pension but they invested company stocks and just set aside enough cash… Read more »
Hi Susan thank you for leaving a comment. I am raising awareness in the community that pensions are never guaranteed and may not always enough. I have to agree that we have to diversify but the most important aspect is to exercise due diligence in whatever investments we commit ourselves in.
I guess the key here is not solely depend on government retirement income, rather, build your own retirement income. With so many things going wrong with politics and economics, the best approach is diversification of income resources; stocks, real-estate, segregated funds or mutual funds, precious metals, etc,.
Most of the problem for retirees and people planning to stop working is the self-reliant that their pensions will be enough to cover for their daily expenses when they retire, having worked for the government, company or organization for over 20, 30, or 40 years but has no other investments or sources of income. A lot of countries are struggling with their economy which can happen to anyone, hence, no country is safe. Prevention is better than the cure. So careful planning, implementation, and diversification are some measures that you can control.
Thanks for inviting me! Excited to learn from you!
Thank you Bre and thanks for leaving a comment.
Hello Brod Rommel,
I agree with you that pension scheme is not enough. How I wish for my family to have high level of financial literacy. Financial freedom up to now is a only a dream to me and I may not be able to attain it in my lifetime. Maybe we need to pray for more wisdom for our families to have better behaviors and practices.
Hi Brod Hilarme. Thank you for visiting my blog and leaving a comment. Don’t be discouraged as I myself didn’t know much about financial literacy growing up. The one thing that my mom said that always stuck to my head is that, she said “It’s not how much you make but how much you keep.” It’s never too late to learn and it will be one of the greatest gifts if we can pass it on to our kids, financial literacy, that is!
Pension’s are just added income of my retirement savings. I don’t count on it and I don’t rely on it. If my company offers it, well and good, if not, oh well, I prefer a great pay. I play the stock market and I do my own investing. I do not trust the fund managers as they have nothing to lose if my money should disappear. It’s not theirs to begin with. It’s not to late to learn. Play with your own money. Trust nobody.
Hi Ingrid thanks for dropping by. Excellent point and I’m glad we are on same page. I am interested as to what is your strategy and what you are investing.
I agree that we must not rely on our pension.
Hi Marivic. Not only that you don’t need to rely on your pension but to look for other sources to supplement your pension.
Hi Rommel… thanks for invite… Henry and I totally agree with you. Thanks for sharing your advocacy.
Hi Queenie and Henry. Keep it up and thanks for leaving a comment.
Hi Rommel, I totally agree with everything you said. I think this will enlighten a lot of people who will get to read this. very insightful financial advice for everyone looking forward into retirement. Thank you!
Hi Rico. Thank you for visiting my blog and leaving a comment. It’s unfortunate that a lot of people rely so much on their pensions without any back up plan. The good thing is, that, it’s never too late and anybody can start putting away themselves.
This is good Rommel, I hope one day I will have a courage to do what I want to do which is to have my own business. I just dont have the courage and financial ability to make ot happen yet but, Im sure that day will come someday…..
Hi Verna. Thanks for dropping by and leaving a comment. I believe that there is nothing impossible in life if you put your hearts and mind to it.
Thank you for the great info! Good to know. Will start thinking about this.
You’re very welcome Goldy. Thank you for visiting my blog and leaving a comment.
Good points, Rommel! You brought up some points that I hadn’t thought about. Looking forward to seeing more from your blog.
Thank you Sidney for visiting my site and leaving a comment. I’m glad that you agreed some of my points.
Definitely pension is a good source but also may be unreliable these days. We have to think ahead…good point Kuya Rommel that’s why we are investing in some other sources and income generating sources here in the UK and back home. Apart from this I’m very focus on my health there’s no point of investing if you can’t enjoy it when you reach your retirememt age. We can do healthy lifestyle, financial investments and leisure at the same time all together. It is our right framework of thinking and right habits. 👍 Love your blog and continue to inspire our… Read more »
Thank you for visiting my site and leaving a comment Randy. Appreciate your kind words.
It is easy to check how much will be your pension (CPP) if you retire today through a CRA account. You’ll also be able to check your CPP contribution (employed or self-employed).
The average pension is CAD 600 ish. Another source of income in retirement are OAS, GIS, and RIFF.
But like what others have mentioned, it is best to have a steady cashflow in retirement through dividends, rental property, business, passive income etc.
I am really concerned when people talked about pensions and state benefits during retirement because these are not – given. Companies and government go bust and can easily declare bankruptcy and nothing left for old Joe/Jane! I’d like to build my cash flow from other sources as I can have access on these funds anytime and not something that is still happening in the future.