Another difference is that defined benefit plans generally are required to make annuities available to participants at retirement. If you have a pension plan that provides a lifetime annuity, it protects you against longevity risk, the risk of outliving your assets. Defined contribution plans, such as 401(k) plans, typically do not provide an annuity option.
The trend toward defined contribution plans means employees are responsible for saving enough for retirement and for ensuring that their savings last through their retirement years.
Here is some information to help you manage this.
Retirement Asset Allocation
The most common reason to change your asset allocation is a change in your investment time horizon. As you get closer to your investment goal, you'll likely need to change your asset allocation. For example, as they get closer to retirement age, most people hold less stock and more bonds and cash equivalents. You may also need to change your asset allocation if there is a change in your risk tolerance, financial situation, or the financial goal itself.
Lump Sum Payments
Some people cash out retirement accounts and receive a lump sum payment. Receiving a lump sum payout can be very exciting because most people rarely have the opportunity to spend or invest a large amount of money at one time. But figuring out what to do with a lump sum payout also can be very stressful, especially if you aren't comfortable making financial decisions.
For a comprehensive array of retirement calculators, visit First Security's resources.
Our Wealth Management team offers a no-obligation Complimentary Retirement Analysis of your retirement savings, including tax planning, budgeting and asset allocation. The review will include a Social Security analysis and a guide as to which sources of retirement income to use first.
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