Do not rely on your pensions

 

Pension is a deferred compensation for employees who worked in government or private companies. You will receive 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 government and companies go bankrupt, do you have other sources of income coming in?

It is a good program, like many other believed but it's not perfect. Some governments and companies have encountered so many problems that some of them are unable to fulfill their obligations. 

In the past, (also happening now and possibly in the future) we saw companies and government gone bankrupt and were not able to pay their beneficiaries.

The pensioners have waited for so long only to find out that they will receive nothing. Most of these beneficiaries don’t have enough or have not prepared themselves. They don’t have other sources of income when they retired and rely solely on their pensions.

In my humble opinion, pension scheme is a good program but I think it's not enough and outdated.

The problem I have with pension scheme as an employee is three fold.

1) Governments and companies want you to work for them until you retire so that 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 are unfortunate 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 relying solely on pensions. Internet and the digital age has given us so much, that information is now accessible to anybody.

Millennial's have the greatest opportunity especially if they work early and start investing and 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 produces income such as stocks (dividend), real estate (Rental Income), Bonds and notes (interest), and intellectual property (royalties) to name a few. On the other end of the scale, 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 good program but it's always not 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 does 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.

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Geri Gavrilovic
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Geri Gavrilovic

When economy goes down pension may go down too. . We may end up having nothing in the end.

Mae
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Mae

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 »

Jackie
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Jackie

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.

Peewee
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Peewee

Nice blog brod Rommel! Very helpful..Thanks for inviting me.I’m a fan now…wanna read more! God bless! 🙂

Susan
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Susan

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 »

Yaser Ababneh
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Yaser Ababneh

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,.

Bre
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Bre

Thanks for inviting me! Excited to learn from you!

Hilarme Cabibil
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Hilarme Cabibil

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.

Ingrid Uy
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Ingrid

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.

Marivic Santos
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Marivic Santos

I agree that we must not rely on our pension.

Queenie Darrah
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Queenie Darrah

Hi Rommel… thanks for invite… Henry and I totally agree with you. Thanks for sharing your advocacy.

Rico
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Rico

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!

Verna Sangalang
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Verna Sangalang

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…..

Goldy
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Goldy

Thank you for the great info! Good to know. Will start thinking about this.

Sidney
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Sidney

Good points, Rommel! You brought up some points that I hadn’t thought about. Looking forward to seeing more from your blog.

Randy
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Randy

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 »

PPGal
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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.