What Can You Do With Pension Funds? A Closer Look

According to some research, 25% of Americans have no retirement savings, which means that 75% of people do. If you’re part of that 75%, you might be wondering what to do with your pension funds.

If you are, you’re not alone.

Keep reading to discover what alternative investing or payment options you can get with your pension fund.

What Is a Pension Fund?

A pension fund is a retirement plan where an employer contributes a pool of funds that you can use when you’re retired. This is also invested on your behalf, and the earnings help to generate income for when you retire.

However, these funds need to be managed to make sure that the people who are retiring will receive all of the retirement benefits promised.

When pension funds first started, companies would invest funds in government securities, blue-chip stocks, investment-grade bonds, and more. Now, they’re investing in alternatives like stocks and other assets.

Payment Options

When you are ready to retire and take your pension out, you’ll need to decide how you want your pension paid out. This will vary depending on your personal situation.

Normally, you can take a lump-sum distribution or you can receive payments over a monthly period. Normally, you can take a payment out over a joint-life period if you’re married.

When you take out a lump sum, you’ll get a large sum of cash immediately. However, you’re then responsible for managing that money for the rest of your life. Some people are overwhelmed by that idea and don’t want to do it.

However, you can also get a monthly payment option. This can be great for people who expect to live for a while and don’t want to worry about potential losses and picking investments.

Consider Period Options

After your fund investing period, you’ll also have to decide on the payout period. Some pension plans will let people take a higher payout and receive that pension over a set period of time.

Normally this period of options ranges between ten to twenty years. However, when you choose this option, the check will still keep going to the spouse of the retiree.

However, if you expect to live longer, then this might not be necessary.


When you take your pension out, you may want to just save it in something else. You could put some of it into your 401(k) or put it in some other contribution plan.

This means that you’ll have a good stream of income when you start taking the money out. This way, it’s unlikely that you’ll outlive your income payments.

However, the payments will be fixed, so your money could lose value over time due to inflation.

Another option for saving would be to put it into an IRA. You’re allowed to contribute a certain amount of money each year, but you can start withdrawing funds from this account when you’re older than 60.

Annuity Payments

Annuity payments are also known as stream payments. You’ll get a check each month with the amount of your pension for a fixed period of time.

Your employer will calculate the amount of payment on several factors. Those include your age, salary, and how long you worked at a company. You’ll be able to know how much you’ll receive before you retire.

You won’t have to worry about outliving your payments from pensions with this. That’s because you’ll know how much amount is going to come in on a regular basis, which makes it easier for you to budget.

Survivor Option

If you decide to go with monthly payments, you’ll also have to decide if you want to have a single-life benefit or a joint survivor benefit.

If you choose the first option, you’ll have a higher monthly payment. However, if you die, then the payments stop, and your survivor won’t be able to get any of the money.

Keep in mind that if you want to choose this option, your spouse will have to consign a consent form.

If you choose the survivor option, you’ll have a lower monthly payment, but if you die, then the spouse will receive the lifetime payment. You can choose which percentage of your plan you want to share with your spouse.

The monthly payment will be reduced by that amount.

Choose a Mix of Options

If you’re not sure which option you want to choose, you should consider customizing your own plan and choosing a mix of different options. This might help give you the flexibility you need during your retirement.

For example, you can use one lump sum at the beginning of your retirement and then have monthly payments later on.

If you have a large pot of money from your pension, you could take all the money out, re-invest it, and then take even more money out later on.

If you have more than one pension, you’ll be able to choose a different option for each pension as well.

You could even keep saving into your pension. By doing that, you’ll get tax relief until you’re 75 years old.

Discover More Things to Do With Pension Funds

These are only a few things that you can do with pension funds, but there are many investment alternatives out there as well.

However, before making any decision, it’s best to talk with a financial advisor about what’s best for you and your portfolio.

If you’re interested in finding more financial advice, make sure you explore our website!

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