By Craig J. Ferrantino
Your pension is likely your largest financial asset—and the key to securing your future. Yet, when I ask officers what their biggest asset is, many say their home, Social Security, or deferred compensation. However, if you calculate the lump sum required to generate your monthly pension benefit, the number is staggering. In some areas, that figure can reach $1.8 million.
If you are a rookie cop, you may be 20+ years away from receiving your pension. However, if you seek to answer the four questions below, you will be ahead of the game and in a much better position.
How is my pension calculated?
It is important to understand how your pension is calculated so you can do the best you can to maximize that pension later in life. This is really a multi-part question to help drill down when, how and how much you will receive in the future. How many years do you have to work to qualify to receive the pension (this is also known as being vested)? Does the pension system you are covered by look at all years of service or the highest 3 years? Does your overtime above your normal salary count? Is there a level I max out? Find out who your contact is to learn more regarding your pension and how it works. If it is available to you, consider meeting with this contact or a union representative to learn more early on.
If I change police departments or careers, can I roll over my pension to that new plan?
Can it be transferred to another pension system or retirement plan? What about the time I have accrued — does that transfer as well? If you have time with another pension system prior, you may want to ask if your time is transferable to this new pension system and what options are available to you.
What happens if I become disabled or if I retire early?
What happens to the time I have accrued and years earned in my pension plan? What options do I have if I am no longer able to work? Understanding your options should you become disabled is very important, and I recommend you are educated on that topic right from the beginning of your career. It is not the focus of today’s article, but it is a topic that is invaluable to you and your loved ones.
What happens to my pension if I pass away before retirement? What about after retirement?
Having the knowledge and necessary steps and actions that are needed surrounding your pension can make or break the future success of your loved ones. Be sure you and your loved ones understand and know exactly what happens, who to call and what resources are available. If your spouse does not get a pension, maybe you need to investigate getting more life insurance while you are young and healthy. Explore your options now to ensure no one is left relying on a GoFundMe page later.
Again, your pension is most likely your largest asset, and without a doubt the most integral component of planning for you and your loved one’s future. I hope these questions help you make the most of your pension and allow you to take steps where needed now to ensure your loved ones are protected in the future. Thank you for all you do to keep your communities safe!
About the author
Craig J. Ferrantino is a financial professional and Certified Financial Fiduciary® that specializes in financial planning for law enforcement. His firm, Craig James Financial Services, provides law enforcement professionals with the financial tools, resources and guidance they need to secure their financial future. The company focuses on understanding the unique circumstances that come with the law enforcement profession and find personalized solutions to fit those unique needs. To learn more about Craig James Financial Services, LLC visit www.CraigJamesFinancial.com or call 631-393-2888.
Craig Ferrantino is a registered representative offering securities and advisory services through United Planners Financial Services member FINRA, SIPC. Craig James Financial Services and United Planners are not affiliated. This is for educational purposes only.