I want to talk about something I call The Pension Double Dip Strategy.


We’re located here in Michigan, outside of Detroit, and we have a lot of automotive clients, a lot of people that work for Ford, GM or Chrysler. And like a lot of companies, Ford, GM and Chrysler have all frozen their pension plan. So what that means essentially is that many of these people are not getting any further pension benefits. In other words, their pension’s locked in place right now. And what’s more, some of these companies allow them to begin collecting their pension benefits as early, in some cases, as age 58, and have them be un-reduced.  In other words, they’re going to get the same amount at age 58 that they would get even if they waited all the way until age 65. So there’s really no benefit for them to work those additional seven years in terms of what they could collect from their pension.

Also, some of these companies offer something we refer to as the Social Security Pension Bridge.

That means essentially, is that if they retire prior to age 62, which is the earliest age that you can begin collecting social security benefits, they’re going to give you a supplemental pension, usually it’s between 800 dollars and maybe as much as 1200 dollars a month, that you’re going to get every month in those months prior to you turning age 62. So that adds up to a lot of money.

What we had a lot of clients do here, is they actually retire from one company, they turn that pension benefit on, let’s say, at age 58, and then they go work for one of the competing companies. And hopefully they can make pretty close to the same amount of money that they were making before.

Here’s a quick example of this is, let’s say you’re making 100,000 dollars working for one of the companies, and you can collect your pension benefit at age 58. So you can retire at 58, begin collecting that pension, let’s say it’s 20,000 dollars a year, and then maybe you’re also going to get that social security pension bridge, which we’ll say, is another 10,000 dollars a year. So you’re going to get 30,000 dollars in pension benefits at least over those first seven years of retirement. Now if you go work for another company, and let’s say you can make the same 100,000 dollars working for one of the competitors, now you’ve just increased your income from 100,000 dollars a year, to 130,000 dollars a year. And that can really be huge in terms of helping you prepare and plan for retirement.

That’s extra money you could use to save more money for your retirement, if you’re maybe a little bit behind. If you want to put more money into your 401K plan or fund a Roth IRA account, you can do that. If you want to use it to pay down some debt. Maybe you want to pay off some bills. Maybe you want to more aggressively pay down your mortgage, and get your mortgage paid off before you retire. There’s a lot that you can do with that. And it can really help you get your retirement back in a pretty good position.

The other options is that you can just use it to say, hey, I’m going to work for a different company. Maybe that even entails a little bit less stress, or a little bit more freedom. Then you’ve got that extra 30,000 dollars, maybe you and your spouse or you could do some nice traveling. And you could go some places you want to go, because now you’ve got that extra income coming in and you’re healthy enough to do that.

It’s a great strategy. We’ve been doing it here quite a bit. In fact it’s actually getting really popular and it’s actually getting a little bit funny, because we’ve got clients that are just going from Ford to GM, and GM to Chrysler, and Chrysler to GM, and we’re seeing a lot of activity going on, especially with that age bracket that are in that 58 and above bracket, there where they’re getting close to retirement. So, I hope you found this helpful.



What I Do

I help individuals make the transition from working to retirement.

As you approach retirement you will be making some of the most important financial decisions of your life. Most of these decisions don’t get a do-over, once you’ve made them your stuck.

My goal is to help you get the most out of your retirement resources. I do this by coordinating and optimizing what I call the 7 Core Elements of Retirement Planning.

It all starts with a plan!

We use advanced financial planning software to help you understand your retirement cash flow so you know where the gaps are.

Understanding your retirement gap is the foundation to getting the most out out of your retirement resources and avoiding costly mistakes.

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