Work, Life and the Pension

Posted on 14. May, 2012 by in Your Wealthy Life

Work life and the pension

As you may already know, my wife and I recently welcomed our second child into the world.  Honestly, it was just as good as the first time and the thrill of creating life and having something so small and beautiful totally reliant on you is quite overpowering.  I guess I was a little more relaxed this time around as I had some idea of what to expect, but when it happened the first time I got a little worried about… well everything and consequently wasn’t thinking quite as rationally as usual.

In my haste to ensure my wife and I could provide the best for our child I made some very quick decisions about life insurance and income protection and had a financial advisor set up some rather expensive protection through our pension plans (superannuation funds).  The cover was good, so it put my mind at ease in that regard, but the fees were really high and impact on our pension plans was pretty evident the next time a statement came in.

Unfortunately it is almost as difficult leaving a pension plan as it is signing up for one, so it took a bit of time to arrange a new one and to roll everything over.  On the bright side I did it myself the second time around after learning a few lessons along the way.  In hope that you don’t suffer the same fate, I figured I share a few things with you.

1. Identify the pension plan yourself

Although I really knew better, I let the financial advisor select our pension fund provider.  Generally it is the trailing fees or finders fees that help them make this decision as much as any real benefit to you.  Finding a good pension provider is like finding a good bank, spend some time doing your research and find a good provider with the features you want.  I’d still recommend having a broker look at it too, the service is free after all.

2. Borrow expert knowledge

The good part about using a financial advisor to set up our initial funds was that I got to see what they were providing and how.  The life insurance and income protection market can be a financial mine field if you are trying to do things yourself, so taking that information and applying it in a different setting was pretty helpful.  The key for us was arranging this insurance through our pension funds so that we didn’t have any additional out of pocket expenses.  Once I knew how to do that, it was easy enough to find a better way than the one we had initially been provided and to work out exactly how much cover we really needed.

3. Don’t delay the obvious

Something I did do right was realise my error reasonably quickly and take action to change it.  If I’d left things the way they were for an extended period of time it would have had a significant effect on our long term funds.  What starts as small amounts in the present can amount to a very large difference over time.  Almost everyone knows this, but many of us don’t do anything about it because it is a hassle.  Service providers know this too and make it as hard as possible for you to stop using them, don’t fall into the trap.

Why we buy things we don’t want

I definitely don’t ever want to use income protection, or worse still life insurance, but I do want to ensure the people I love are safe.  My theory is simple; if you get it, you will probably never need it, but I don’t want to leave home and investment loans hanging around for other people to deal with.

Does your pension plan perform well and do everything you want it to?

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11 Responses to “Work, Life and the Pension”

  1. Simple Finance Blog

    17. May, 2012

    My husband’s employer (government) has a traditional pension, but we also take advantage of his employer-sponsored Roth IRA as well as my spousal Roth. I’ve never given much thought to expanding to another account like a annuity or super-annuity.

    I’ve got to know, is that a picture of your new baby’s hand?

    • Shaun

      17. May, 2012

      It sure is our new baby’s hand holding my wife’s. She has been extra good so far and loves being close to us and holding hands 🙂

  2. Borrowing expert knowledge is key to success in just about any industry, don’t you think? It’s one of the best ways to learn.

    • Shaun

      17. May, 2012

      I think it is a great strategy and basically how we all learn. I’ve managed to achieve quite a lot by applying what I see and learn from others, it has saved me thousands over the years.

  3. Jeff @ Sustainable Life Blog

    17. May, 2012

    interesting thoughts – as im getting married soon, I’m going to need to start looking for thigns like that – life insurance, etc. Not happy about it at all, but it does need to be done. congrats on the addition, BTW>

    • Shaun

      17. May, 2012

      Thanks Jeff and good luck with the wedding! Paying more money for more insurance is definitely one of my pet hates, but sometimes it is worth it when it means you can protect the ones you love.

  4. Welcome back and yes, I feel like you do. I would like to make sure that the people I love and care for are well provided for if something happenes to me. So, I often jokingly say that I am worht more dead tha alive (which of courses is rubbish). Selecting and managing your pension is very important!

  5. Jai Catalano

    22. May, 2012

    Congrats on your second child. I think the one thing you can save on is clothes if you have friends and family with hand me downs. My wife and I save a lot that way.

  6. Congratulations on the new addition Shaun! Don’t forget the 529 plan, starting young makes the monthly investment much more affordable.

  7. My World of Finance

    30. Jun, 2012

    When you have other people in your life you are responsible for you look at life differently! Yes, many things you might not use or need, but you sleep better at night knowing your loved ones are protected.

  8. Andrea

    24. Jul, 2012

    I agree, when you have responsibilities to shoulder, it’s better you get started with your financial planning at an early age. Personal finance is something which should be taken care of from the very beginning of your professional life. Until and unless you have a strong resource as well insurance coverage for post retirement, you won’t ever get a nightmare free night. I have seen my father struggling with it, hence I wish everyone looks into the matter before it’s too late.
    Andrea Jones