Leveraging a Pension Can Bring Financial Opportunities
Leveraging a Pension Can Bring Financial Opportunities
Employees of the state enjoy a benefit that is fast disappearing in America: a pension. Providing annual income to the state employee after retirement, a pension is a wonderful benefit that supports an individual for years to come. The idea is that the employee and state invest a percentage of the employee's income each month, and then after twenty or thirty years the employee will receive a predetermined amount each month through state pension for the rest of their lives. However, these pensions are not flexible like other assets in their ability to provide employees revenue in times of uncertainty. A house, for example, is a significant asset that can be borrowed against as long as there is equity in the home. A new feature for state pensions is the ability by qualified lenders to extend a loan against the projected retirement. The loan agency and pensioner determine the value of the loan based on state formulas. A fixed-dollar figure is determined by the pensioner concerning the total amount that can be transferred to the loan agency. The agency will then pay out a lump sum to the pensioner through a loan. Over a period of time the loan is repaid, but the state pension continues to grow and is not altered in any way. It is also possible to sell pension agreements. Military personnel often find that after a few years of dedicated service to their country that the monthly pension payments do not provide enough revenue to get started again in civilian life. An alternative is to the sell the pension to a retired military financial services institution. Such service providers can calculate the entire value of the pension using the military's accrual formulas so that no money due the honorable military personnel will be lost. Military personnel should expect a below-market interest rate, as is the practice of retired military financial services.