It’s important to have a strategy to generate income that can last your entire lifetime—income that can weather all the unexpected ups and downs. In planning for a long, rewarding retirement, you must anticipate and overcome the obstacles that are likely to arise along the way.
Now that you’ve created your retirement plan, it’s time to work towards making those plans a reality.
Sources of Retirement Income
Now that you’ve created your retirement plan, it’s time to work towards making those plans a reality.
Employer Sponsored Retirement Programs
Personal Retirement Sources
Government Sponsored Pensions
1. Defined benefit plans
2. Defined contribution plans
3. Employee Savings Plans
1. Pensions
2. Annuities
3. Home Equity
4. Investments
5. Rent and Royalties
6. Savings Account
7. Post Retirement Employment
8. Inheritance
1. Old Age Pension
2. National Insurance Board Pension Benefits
Employer Sponsored Retirement Plans
An employer-sponsored plan is a type of benefit plan that an employer offers for the benefit of his/her employees at no or a relatively low cost to the employees. The benefit to the employer is that initiating these plans usually has some tax-deductible component, and sponsoring benefits is generally a good method of retaining valuable employees. Many employers include matching-contribution provisions and other salary deferral feature plans. If you are a participant in such a plan and you are not making salary-deferral contributions, you could be losing the benefits offered by your employer. At a minimum, you should consider making salary deferrals up to the maximum amount your employer will match. This is considered to be ‘free money’ and should be capitalized on to maximize your retirement savings.
Approved Retirement Plans
A pension plan is a retirement plan that requires an employer to make contributions into a pool of funds set aside for a worker’s future benefit. The pool of funds is invested on the employee’s behalf, and the earnings on the investments generate income to the worker upon retirement. Approved retirement plans are approved by the Board of Inland Revenue (BIR) for favourable tax treatment. Defined Benefit and Defined Contribution Plans are approved plans.
Defined Benefit Plans
A defined benefit plan identifies the specific benefit that will be payable to you at retirement. Your basic retirement benefit usually is based on a formula that takes into account factors like the number of years a participant works for the employer (years of service) and the participant’s salary (e.g. average of highest three or five years of earnings). Your retirement benefit generally is provided in the form of regular payments over your lifetime beginning at what the plan designates as normal retirement age, which is typically age 65. This stream of periodic payments generally is known as a pension or sometimes called an annuity.
Defined Contribution Plans
A defined contribution plan specifies how much money will go into a retirement plan today. The amount typically is either a percentage of an employee’s salary or a specific dollar amount. Those funds are generally invested in mutual funds or annuities available inside the retirement plan. The amount you have at retirement depends on how much (if anything) your employer contributes to the plan, how much you as the employee save in the plan, how long you leave those funds invested, and how well your investments perform inside the plan.
Employee Savings Plans
Corporate savings plans are optional plans employers may offer to staff which can be used to supplement their existing savings or as an alternative to their retirement savings. These plans may have an employer contribution amount or match as part of the benefit package for staff.
Personal Retirement Sources
Annuities
An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.
Home Equity
Home equity is the value of ownership built up in a home or property that represents the current market value of the house less any remaining mortgage payments. This value is built up over time as the property owner pays off the mortgage and the market value of the property appreciates. It can be capitalised upon sale of the property either to a relative or third party.
Investments
An investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. Investments are an important source of income during retirement. An investor should stick to a balanced portfolio for the duration of his or her retirement, and review the portfolio at least annually to monitor and rebalance as needed.
Rent and Royalties
Income from a rental property or intellectual property can be used to help pay for retirement by the people who have this option.
Savings Account
A savings account is an interest-bearing deposit account held at a bank or another financial institution that provides a modest interest rate.
Post Retirement Employment
When you picture yourself in your golden years, are you sitting on a beach, hitting the golf course, or working behind a desk? For many people of retirement age, continuing to work makes perfect sense. However, this doesn’t mean that you can’t balance your work life with enjoyable activities, such as vacation. You may opt to stay active and involved through a variety of activities, including full or part-time work. Working for yourself or someone else during retirement can provide an additional source of income. For many, working provides more than a paycheck. It provides happiness and purpose, and staying in the working world can provide many lifestyle benefits, in addition to financial gains. For others who don’t want to continue working, they may be forced to for financial reasons such as insufficient retirement savings, poor investments or the need for health insurance.
Inheritance
Potential inheritances can be considered as a source of retirement income, as formal state planning and transfer of assets is now becoming the norm.
Government Benefits
Senior Citizens Pension
Who Qualifies
Age – Persons sixty-five (65) years and over
Residence – Applicants must be resident in Trinidad and Tobago for twenty (20) years preceding the date of application. Any periods of absence must not total more than five (5) years during the twenty (20) years preceding the application.
OR
The applicant must have lived fifty (50) years in total in Trinidad and Tobago.
N.B. (the years do not need to be consecutive)
Income – Applicant’s monthly income must not exceed $3,500 TTD per month (pension varies according to monthly income)
How to Apply
- An application form can be collected and completed at the Local Board Office in your district.
- Applicants may be required to attend an age assessment meeting with the Local Public Assistance Board.
- The Assistance Board decides on all applications and rejected persons have the right to appeal.
Payment Schedule
Income | Senior Citizens Pension |
$0-$1,500.00 | $3,500 |
$1,500.01 -$2000 | $3000 |
$2,000.01 -$2,500 | $2500 |
$2500.01- $3,000 | $2000 |
$3,000.01 – $3,500 | $1,500 |
$3,500.01 -$4,000 | $1000 |
$4000.01 – $4,500 | $500 |
Source: http://www.social.gov.tt/divisions/social-welfare-division/
National Insurance Board of Trinidad & Tobago - Retirement Benefits and Grants
What Is The Retirement Benefit?
The National Insurance Retirement Benefit is designed to supplement the income of individuals after retirement. Every employee who has paid National Insurance contributions is entitled to a Retirement Benefit. You qualify for the Retirement Benefit at any time between the ages of 60 and 65 if you are retired or at age 65 whether you retire or not.
The Benefit may be either:
- A Retirement Pension payable for life to persons who have 750 contributions or more – the minimum requirement for a basic pension; or
- A Retirement Grant, which is a onetime lump sum payment, subject to a minimum sum of $3,000.00 paid to persons who have made less than 750 weekly contributions the minimum requirement for a basic pension.
Who Can Claim?
Anyone who is insured under the system and who has attained age 60 years and has retired or at any age between 60 and 65 years that he or she retires; or who is aged 65 whether retired or not.
What Are The Qualifying Conditions?
- You must have reached Retirement Age.
- The insured person who is age 65 years will receive the benefit whether he/she stops working or not.
- The insured person who is between 60 to under 65 years will receive the benefit if he ceases to be in insurable employment and will continue to receive such pension even if he returns to insurable employment before he attains age 65.
- Have a minimum of 750 contributions to his or her credit. The contributions may comprise of paid contributions inclusive of Voluntary Contributions, Age Credits and or Benefit Credits.
When To Apply?
- A Claim to Retirement Benefit may be submitted about three months before:
- Your 65th Birthday if you are not retired.
- Your 60th Birthday if you retire at age 60 or before.
The date on which you plan to retire if you are between 60 and 65 years of age and still employed. Your Claim must be submitted no later than 12 MONTHS from your date of retirement if you are between 60 and 65 years of age or your 65th birthday whether retired or not.
Source: www.nibtt.net
Retirement Pension and Grant
Retirement Pension
An average rate of contribution is calculated by considering all the contributions paid. The earnings class to which this average rate corresponds is the class in which the benefit will be paid. Where the insured person was in receipt of the Retirement Pension prior to the appointed day, benefit rates are converted. Remember: For every block of 25 contributions paid in excess of 750, one increment is added to the basic pension rate. Notwithstanding the benefit rates in respect of retirement pension the board shall pay with effect from February 1, 2012 the sum of $3,000.00 monthly, as a pension to each person qualifying for a Retirement Pension.
For How Long Will The Benefit Be Paid?
Retirement Pension
Payment of Retirement Pension will start from the Monday of the week in which Retirement Age was reached and continues on a monthly basis for life Payment for each month. It will be deposited to the claimant’s bank account on the 16th day of the preceding month.
What Happens If I Return To Work After Retirement?
Persons who are in receipt of a retirement benefit (Pensions or Grant) and who returned to work on or after January 7, 2008 will continue to receive their Retirement Pension entitlement.
Retirement Grant
Where the insured person reached retirement age on or after January 7th, 2008. The retirement grant will be equal to 3 times the value of total contributions, subject to a minimum of $3,000.00. Where the insured person reached retirement age on or after April? 10th 1975 the Retirement Grant is equal to 3 times the value of the total contributions paid by both employer and employee, subject to a minimum of $200.00.
Where the insured person reached retirement age between April?
10th 1972 and April 9th 1975 the Retirement Grant is equal to 5 times the value of the total contributions paid by both the employer and the employee, subject to a minimum of $200.00.
For How Long Will The Benefit Be Paid?
Retirement Grant Payment
Retirement Grant is one time lump-sum payment. There will be no further payments to the insured.