After helping dozens of UMass Memorial Health employees with retirement planning over the past 30 years, I noticed many share the same top concerns. If you’re nearing retirement, you may have these questions, too. The good news? With the right guidance and strategy, these concerns can be addressed to help you retire confidently.

UMass Memorial Health offers several retirement benefits, from a 401(k) plan with employer matching to monthly and lump-sum pension options. Choosing the right combination of benefits to match your retirement income goals is essential to building your desired retirement lifestyle.

According to the Federal Reserve, fewer than 40% of working adults believe their retirement savings are on track. Understanding your available options and how they fit into your financial picture is a smart first step.

Below are the top three concerns I often hear, and what you can do about them.

1. How Do I Know Which Pension Option to Choose?

UMass Memorial provides multiple pension options, but choosing the right one can feel overwhelming. Should you choose a Single Life Annuity or take a Lump Sum? What about a Joint & Survivor Annuity (J&S) at 66-2/3%, 75%, or 100%? If you are married, what are the pros and cons of a 5- or 10-year Certain and Continuous Annuity versus a J&S option?

The biggest mistake I see? Making this decision without looking at your full financial picture.

Your pension selection is irreversible. Once chosen, it’s locked in for life. That’s why it is crucial to consider how it will integrate with your (and your spouse’s) Social Security strategy, healthcare costs and current health status, retirement lifestyle, and other retirement income sources.

Factors to consider when choosing a pension option:

Whether you will have dependents in retirement
Your estimated retirement expenses
Healthcare coverage options and costs
Tax implications on retirement income
Your spouse’s financial needs if something happens to you
Your retirement location and cost of living
Estate planning concerns (e.g., blended families or dependents with special needs)

To illustrate how these decisions can play out, let’s look at a real-life scenario involving a retiring nurse, “Alice” (name changed for privacy).

Meet “Alice”:

Alice, a UMass Memorial nurse and widow, called my office feeling distressed about her recently selected pension option. After reviewing her options with Human Resources, she chose a Single Life Pension plan that provided the highest monthly benefit. While HR can explain your available benefits, they cannot offer financial advice tailored to your financial situation and retirement goals, which Alice had not fully realized.

During our conversation, Alice shared her desire to enjoy a comfortable retirement and, if possible, leave a legacy to her heirs. She recognized that if she had chosen the Lump Sum option instead, she could have received monthly retirement income and had the potential to leave behind any remaining funds to her loved ones. A Single Life Pension, by contrast, ends with the retiree’s passing, without providing benefits to heirs.

Takeaway:

Your pension option selection is an irreversible decision. That’s why it is important to consult a financial advisor before choosing. Ideally, the advisor is familiar with UMass Memorial Health’s retirement plans. A qualified advisor can help you explore several “What If” scenarios and evaluate how each option may affect your income, lifestyle, and legacy plans.

2. When Should I Apply for Social Security Benefits?

While Social Security likely won’t cover all of your expenses, knowing when to claim benefits can significantly impact your monthly payout. You can start collecting as early as age 62, but doing so could reduce your benefit by up to 30%.

Key considerations for timing your Social Security benefits:

Retirement distributions from your IRA or 401(k)
Whether you qualify for spousal or survivor benefits
If divorced spousal benefits are available to you
Your retirement income needs and health status

The right time to apply for Social Security benefits is different for everyone. If you continue to work in retirement, Social Security limits how much you can earn while receiving your benefits. Earning above that threshold may lead to what’s known as the “tax torpedo”, where 50% to 85% of your Social Security income becomes taxable.

3. How Do I Invest My 401(k) After Retirement?

UMass Memorial’s 401(k) plan is a defined contribution plan with a profit-sharing component and a 401(k) feature. While you are working, choosing and maintaining the right investment allocation for your 401(k) is essential to ensure you will have the funds to support your retirement plans.

The investment strategy you used during your 401(k) accumulation years may not be right for your distribution years. Without a steady paycheck, your investment strategy must shift from growth to income and risk management. If your 401(k) is invested too aggressively in retirement, one bear market could jeopardize your long-term financial security and lead to running out of money. If your 401(k) is invested too conservatively, your investments may not keep pace with inflation, making it harder to sustain your retirement lifestyle.

Meet “Bob”:

I recently met with Bob, a UMass Memorial retiree, who informed me he selected the Lump Sum pension option in 2007. He was embarrassed to tell me that most of it was gone, and did not know what to do when the remaining balance ran out. He felt he could manage his funds after retiring and was initially successful. Once the bear market of 2008-2013 hit, his poor investment choices combined with his need for the 401(k) income left the account nearly depleted.

As we helped Bob create an alternative retirement strategy, one of his comments stuck with me: “Almost anyone can make their money last in a bull market, but let’s see how they do on their own in a bear market.”

Choosing the right investment options when transitioning your 401(k) from the accumulation phase to the distribution phase is one of the most common concerns I hear from retiring UMass Memorial Health employees, and for good reason. It’s rarely a do-it-yourself task and should not be left solely to the plan’s 1-800 customer service line, no matter how friendly or informed their representatives are.

Because your retirement goals, timeline, and financial situation are unique, selecting the right investment strategy requires careful consideration of several key factors, including:

Your overall financial situation
Your risk tolerance
When you want to begin accessing your 401(k) funds
How much income you need your 401(k) funds to generate
The current economic environment and stage of the business cycle
Your retirement income sources and savings

The Bottom Line:

Your investment strategy should evolve as you transition from saving for retirement to living in retirement. Don’t rely on a “set it and forget it” approach, or a call center representative who doesn’t know your full financial picture and goals.

Final Thoughts: Don’t Leave Retirement to Chance

Planning your retirement isn’t something you should do alone. Whether choosing the right pension, timing your Social Security, or investing your 401(k) wisely, each decision carries long-term consequences. Misunderstanding or overlooking the risks in your 401(k) investments can jeopardize your retirement income and the lifestyle you have worked so hard to build.

Many retirees, like “Bob,” have learned the hard way how quickly the market can turn. The Great Recession was a tough wake-up call for many. It showed how critical it is to understand your investment risk, especially in retirement when there is less time to recover from major losses.

A fee-based Financial Advisor familiar with the UMass Memorial Health retirement plan options can better help you build a personalized strategy for your retirement goals. You worked too hard to leave the enjoyment of your retirement years to chance and circumstance. Finivi can help. For a no-obligation 401(k) portfolio review, or to schedule a time to discuss your specific retirement planning needs, complete this form to request an appointment or call us at: (508) 870-0440

Steve is a Chartered Financial Consultant (ChFC) with over 30 years of experience helping individuals and families achieve their ideal retirement. Since joining Finivi in 2001, he has specialized in retirement income planning, Social Security strategies, and aligning investment portfolios with lifestyle goals.

Disclaimer: This information is for educational purposes only and should not be considered legal or tax advice. Finivi Inc. makes no representations regarding the accuracy or completeness of linked third-party content and assumes no responsibility for any outcomes resulting from its use. External links do not imply endorsement.

Please consult a professional before making financial decisions. Social Security benefit amounts and regulations are subject to change. For personalized guidance, consult the Social Security Administration at www.ssa.gov.