I’m 35 and my pension just froze – how can I maximize my retirement savings now?

Pensions have been losing favor as more employers have shifted to retirement accounts like 401(k) and 403(b) plans. This shift continued as a Redditor’s pension was recently frozen. They are a 35-year-old in the nonprofit sector who posted in the Personal Finance subreddit. The Redditor is fully vested in the pension plan due to 10 years of service. 

The Redditor is looking for advice on maximizing what they have in their pension while accounting for recent stock market uncertainty. Some commenters shared their thoughts, but it is good to speak with a financial advisor if you can.

Know Your Options

The top-rated comment suggested that the Redditor needs to know all of their options before making a commitment. Essentially, you can either receive monthly payments when you retire or get a lump sum right now.

A frozen pension may require that you accept a lump sum based on how many years you have worked at the nonprofit. You can then roll the funds into your 403(b) account to defer taxes.

The Redditor should ask how much they are set to receive each month from the pension and if the early retirement terms change at all. It’s good to get all of the information squared right away instead of reaching out in 15-30 years when most of the workers may not know about the former pension arrangement.

One commenter responded to the top comment by saying that it’s important to keep all of the paperwork. That way, if you get paid less than the agreed amount, you can present the paperwork and get the pension that you deserve.

You Still Get the Current Pension

You should still receive the current pension when you retire. It’s just that you can’t wind up with a higher pension, even if you rack up more years of service. The Redditor may want to consider how much they can get from their pension and Social Security. Then, they can calculate how much they have to save up in their 403(b) plan and brokerage accounts to retire.

Knowing these calculations will impact which types of investments you make. People who are close to the finish line can make more conservative investments. On the other hand, people who still have plenty of years before retirement may want to consider growth stocks and ETFs. 

Understanding how the pension aligns with your current finances and long-term goals can lead to better decisions.

Call Your HR Team for More Information

Many commenters found it difficult to provide tailored advice since there are key details that we don’t know. One of the commenters suggested that the Redditor calls their HR team and asks for the number of someone who works at the pension company. Then, you can get more information about how your pension may be affected as a result of the program getting frozen.

Make sure you write notes during this call and hold onto any important documents in case you need them in the future.With this information, it will be easier to decide how you adjust your finances.