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Don’t Dismiss That “Small” Pension

loanFrequently, I’ll meet with clients to go over a retirement plan. As is typical, we look at current investments, account balances, Social Security, etc. Often these conversations revolve around distributions from retirement plans and cash flow planning to reduce the probability of portfolio failure, and ensuring an income stream that is congruent with the clients’ retirement goals.

Sometimes clients will also have small pensions from their current or former employer and they will tell me that they are small, trivial, or not worth considering.

Whenever I hear those words or something similar, I try to explain to the clients that however small or trivial, it’s still a guaranteed income stream that will last the rest of their lives in many cases.

For example, I have seen clients think that a $150 monthly pension wasn’t a big deal. But when I present to them that there’s an amount for a “date night” once a month, they can visualize using that money for the date night. A similar expense would be cable TV, funding a grandchild’s 529 plan, etc.

In another example, some clients had roughly $350 in monthly pension money coming from two different sources. They were concerned about having a travel fund in retirement. Their travel budget in retirement was approximately $8,000. When I mentioned they could allocate the pension money to fund half of their annual travel budget, they could visualize the pension money being used, and were almost relieved that they didn’t have to worry about where (half) of their travel budget would come from.

In other words, half of their travel budget was guaranteed by the “small” pension money that was almost an afterthought of our conversation.

The point is, with a pension, that amount can be allocated to cover a specific retirement expense and individuals can know that a certain expense or expenses are going to be met by the pension. It means one less expense to worry about where the money is going to come from, and it can reduce stress knowing that no matter what, the client is always guaranteed to meet that expense.

Put another way, per the examples above, clients can guarantee they will have a travel fund, fund a grandchild’s education, or a monthly date night in retirement.


  1. That’s a great point about visualizing what the retirement income brings, rather than just looking at the number. I do that with active earnings, since I’m a consultant and often have different levels of clients and projects. I have a writing retainer that’s small on an hourly basis but b/c it’s regular each month I know it pays for my Roth IRA contribution. Another monthly client that is a smaller fee pays my mortgage and car. It definitely gives heft and importance to each money stream that comes in. On the flip side when I need inspiration to earn more, I’ll think about how many of a particular client or project I’ll need to pay off a debt or afford an expense.

    1. jblankenship says:

      That’s a great way to look at your income, Caroline. Thanks for sharing!

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