By Craig J. Ferrantino
In this series, I am starting and ending each article the same way — 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.
Last time, I listed four essential pension questions every rookie cop should ask. This article is for mid-career cops who may be around 10 years away from receiving your pension. While retirement may still feel distant, now is the perfect time to start asking critical questions to ensure you’re on the right path. The years go by quickly, and before you know it, you’ll be preparing to say goodbye to the force. Taking proactive steps today can help you transition smoothly into retirement and provide long-term security for you and your loved ones.
How much will I receive as a pension in X years?
Get an estimate of your pension now that you have 10 or so years on the job. See what the pension looks like now and run a projection for what it would look like when you plan to retire.
What is the updated death benefit amount that my beneficiary would receive should I pass away before I elect a pension?
This number may change, and it is important that you and your loved ones know what they are entitled to and how to receive it. While you research this, it is also important to review your beneficiaries listed. Make sure you have the correct beneficiary listed with your state and local government!
How much do I need to live in retirement?
Go through your cash flows! We assist our clients with this exercise to determine what money they have coming in and going out, and then what is left at the end of each month. When you retire, the opportunity to earn overtime pay ends, so you need to learn to live within a set income. Looking at these figures now and starting to control your cash flow can help set the needed discipline for your retirement years.
Are there opportunities to increase my pension?
In my previous article I mention the importance of knowing how your pension is calculated, as maybe now as a mid-career cop you may want to start working even more overtime. Review ways to reach the most credits to max out that monthly pension amount.
Do you have a retirement plan outside the pension, like a deferred compensation plan (457(b))? If so, are you maxing that out?
When you first start on the job, cash flows may be tight, but as a mid-career cop your compensation may have since increased. These additional funds can allow you to contribute more to your retirement plan. In addition to your pension, it is important to also consider other savings opportunities. Review the investment options available to you through your employer and that you can open independently. You might consider meeting with a professional to determine the best options for your specific situation.
Without a doubt your pension is 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.