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IRA Financial Blog

Is Now the Time to Set Up a Pension Plan? – Episode 228

Pension Plan

IRA Financial’s Adam Bergman welcomes Tim Caldwell from Pension Investors Corporation of Orlando, to discuss why this is a great time to set up a pension plan.

We’re thrilled to be joined by Tim Caldwell, from Pension Investors Corporation to discuss pension plans during the current pandemic and financial crisis. Tim is an expert in pension plans and thinks now may be a great time to set one up. We learn a little about Tim and his company as he talks to us about all things retirement plans.

What is a Pension Plan?

A pension plan is a type of defined benefit plan. This plan provides future benefit to the employee in the way of monthly payments. Generally, the amount is based on how much you contribute, and, in many case, how long you have worked for the company.

The employer is usually in charge of all contributions and the design of the plan, including investment choices. They will also choose the length of the benefit, whether it’s five, 10, or 20 years. Employers take all the risk in a pension plan. Pension plans are usually protected by the Pension Benefit Guaranty Corporation. This means you will have a pension, even if your company goes bankrupt.

What is a 401(k) Plan?

A 401(k) plan is a profit sharing plan, which allows contributions by both the employer and employee. The employee contribution is elective, meaning they don’t have to contribute if they don’t want to. They may contribute up the annual limit, which, for 2020, is $19,500 or $26,000 if age 50+. Contributions can made either pre-tax (traditional plan) or after-tax (Roth plan). The employee gets to participate in his or her own retirement planning.

The employer can choose to make matching contributions or profit sharing contributions. This means they will either match each employees’ contribution, up to a certain percentage or contribute on behalf of the employee, when no contribution is made. This helps create loyalty from employees who are looking for benefits of the company.

Is Now the Time to Set Up a Plan?

Those who already have a pension plan or other type of retirement plan, are not panicking right now. They have been diligent with their savings and, though the markets have been down, they are still in a good place. However, those who have not looked at setting up a plan are not as fortunate. This is especially true for small business owners and their employees. So yes, now is as good of a time as ever to look into your retirement plan options.

For one thing, there is no time crunch right now. There are no deadlines for setting up the plan. Therefore, you have time to discuss and research all the plan options out there. You can see if a pension plan or 401(k) plan is best for you. As Mr. Caldwell explains, it’s his job to tailor a plan that works for you, your family and your employees. Big companies, such as Vanguard and Fidelity, only care about how much your assets are worth. They just administer the plan, and are not looking out for your best interest. Boutique companies, like Pension Investors and IRA Financial, are all about you, the client.

A lot has been exposed due to the COVID-19 pandemic. One thing is for certain, if you are not saving for retirement, you are in worse shape than someone who is. In fact, the CARES Act, which is a stimulus package for all Americans, has many provisions allowing for easier access to retirement funds. However, if you have little to nothing saved, it’s not helping you right now.

One silver lining due to this crisis are “depress assets.” These are assets whose value decreased because of the coronavirus. Many of these assets will return to pre-pandemic numbers. Now is the best time to buy these stocks because of how undervalued they are. They can only go up!

Get Started Now

To emphasize, you need to be saving for retirement right now. The tax advantages of saving in a pension plan or 401(k) are huge. Plus, the earlier you get started, the better off you are. The discipline of contributing to a plan, and increasing those contribution as you are able, is also imperative. Take the time now and do your research and get started on saving for your future.

Again, thanks to Tim Caldwell for joining us on the podcast. Be sure to check out his website if you are interested in starting a pension plan. Also, head over to our SoundCloud page to check out all of our podcasts. Thanks for listening and remember to practice social distancing!


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