No Pension, No Worries: Alternative Ways to Secure Your Financial Future Without a Pension

Imagine getting a guaranteed check every month for the rest of your life, starting when you retire. It’s not the lottery—but those amazing pensions that our grandparents used to talk about getting. You’ve heard the stories of staying loyal to one company, and they’ll take care of you in retirement with a pension. Well, those stories are a thing of the past for most people, so it’s time for a new approach to building wealth.

Investopedia defines a pension as “a company benefit that makes regular payments to the employee in retirement.” They were a common benefit offered in compensation packages until 1978, when the 401(k) plan was established, effectively phasing out employee pension programs. As of 2024, only approximately 15% of private US companies offer them. These benefits are more common today with government jobs, the military, and unions.

If you’re like most employees, you’re left with preparing for your retirement on your own. Fortunately, you can still build substantial wealth by the time you retire without a pension plan.

Alternatives for employees without pension

Relying on a pension for retirement is increasingly less common for employees. Millennials and younger who enter the workforce don’t have the luxury of widespread pension programs like your parents’ generation. The good news is that wealth-building is now in your hands! Instead of your employer determining the amount of money you receive every month during your retirement, you can set your own retirement financial goals.

Here are alternatives to building wealth for retirement if your job doesn’t offer a pension program:

Invest in a 401(k)

Most companies replaced their pension programs with the 401(k). Although it was meant to be a replacement, it actually can be a better option financially when done correctly. Many

pensions have fixed payouts with no adjustments for inflation. However, your 401K gives you

more control and flexibility in managing the amount of your monthly payouts. Your 401(k) probably will be your main retirement source. Start early setting up a 401(k) and begin putting money into it every month. Thanks to compound interest and market growth, your 401(k) should have enough money to pay you more every month than you would get from a regular pension.

Bonus: see if your company has a 401(k)-match program. Companies make matching contributions to an employee’s 401(k) plan to help it grow your wealth even faster. Check this post to learn more about the 401k match.

Passive Income

Pensioners all know that feeling of seeing a guaranteed check every month. If you don’t have a pension, you can recreate the same sensation using passive income. The right passive income investments give consistent cash flow.

Two of the best financial tools for passive income are dividend stocks and interest gained from money in a savings account. Real estate is another great source of generating passive income, but managing rental properties often comes with a lot of upkeep expenses and challenges dealing with tenants. There are several low-investment crowdfunding real estate programs available that generate steady monthly dividends without having to manage the properties. Paycheck to Wealth can provide guidance in this area, if you are interested. Keep in mind that crowdfunding programs are not federally insured investment products.

Social Security

Social security is one of the key pillars supporting your long-term financial plan. Regular contributions to this every paycheck will set you up for benefits during retirement. Like a pension, social security will provide you a check every month after retirement and it has a cost-

of-living adjustment to keep up with inflation. If you don’t have a pension, you can take steps to maximize the amount you receive every month from social security.

A higher salary can maximize your social security contributions to increase your overall payout once you start receiving it. Delaying the age at which you begin receiving social security benefits also increases the monthly amount you’ll get. Learn other ways to maximize your social security benefits.

Earn more

Retirees don’t have to rely solely on a pension to help maintain their lifestyle. Increasing income throughout your career gradually gives you more money to invest to outweigh the benefits of a pension program.

There are several ways to boost your salary or even give you an additional paycheck every month. Valuable employees can request a raise or promotion at work. Additionally in recent years, job hopping has been an effective strategy to land a higher salary.

If you’re already near retirement age, it’s not too late! Consider getting a part-time job or side hustle to supplement your retirement income.

Adjust your spending

Living below your means is one of the golden nuggets of financial wisdom. If you don’t have a pension providing a cushion to your income in retirement, you can re-adjust your lifestyle to one that’s more comfortable financially. You can live below your means today and have more money to invest in your future. Or you can downgrade your lifestyle at retirement.

Small changes to your lifestyle can make a big difference in the amount of money you need in retirement. Long-term financial planning helps estimate how much it will cost to fund your future lifestyle and gives you the steps to set yourself up for it today. You must proactively save and invest without a pension to compensate for it.

Employee buyout programs

Pensions were a way for companies to take care of loyal employees in retirement. In addition to perks like 401(k) plans and match programs, other last-minute opportunities can replace the security of a pension plan. Employee buyout programs are when companies offer compensation to an employee in exchange for retiring or leaving the company. These programs typically offer a lump sum payout that can be used strategically by an employee to have more long-term benefits.

With an employee buyout, you can invest the lump sum in a low-risk asset that provides monthly income or in a savings account to earn interest. Resist the urge to spend it all at once, and this one-time payout can yield financial gains year after year.

Next Steps

If you dream of getting a pension from your job, it’s time to wake up! Since most companies eliminated pensions, we recommend doing your financial planning without it. Here are the steps to take to put your financial future in your hands:

1.      Calculate what you need for retirement

2.      Create a financial plan to reach your goal

3.      Invest to build your financial nest egg for retirement

Paycheck to Wealth is with you every step of the way to help you build a more secure financial future. You can still achieve your financial goals for retirement without a pension. If you need help with any step towards building wealth without a pension, contact us today!