How should I invest my SIS Pension Fund money once I am retired?


In general, the sooner you need to spend your pension money, the less risk you want to take with it.  That is why the SIS Pension Fund Life Stage Funds reduce stock exposure as participants age under Age Based Investing.  The Maximum Growth Fund has the largest stock exposure (70% stocks) of any of the Life Stage Funds.  This Life Stage Fund is generally best for younger individuals who have the longest time before they will be spending their pension money.  Stocks are generally considered more risky than fixed income (bond) type investments.  Risk is usually defined as up and down price volatility.  Stocks generally have greater volatility than bonds and therefore are considered somewhat riskier.  Stocks also are generally considered to produce greater investment returns than bonds over time.  All investors have to balance the desire for greater returns against the desire for the lowest risk. 


As you age, the Trustees recommend reducing your exposure to stocks.  So, how should your money be invested once you retire?  While this answer is truly dependent on your own plans for the money and your own risk tolerance, you should consider the likelihood that you will not be spending all of your SIS Pension money in the next few years.  Assuming you plan to use your money over your lifetime, or even longer – over the lifetime of you and your spouse, most early retirees should plan for an investment horizon of 25 to 30 years.  Even if you plan to begin spending some SIS Pension money immediately upon retirement, some of your money will be invested for many years and stock exposure, even stock exposure of greater than the 15% exposure in the Current Income Fund can be appropriate.


Many Sprinkler Fitters have individual accounts that exceed $250,000 and more than a few have accounts that exceed $500,000.  You should consider paying a financial planner to assist you with how much stock exposure you should have and how much of your SIS Pension money you can plan on spending each year.  You want to balance your desire to not overspend with being unnecessarily frugal – you want enjoy your retirement so don’t short change yourself financially in your younger years while you can still enjoy life fully.


One pitfall in finding a financial planner is making sure that the planner’s advice is not tainted by the way the planner makes money.  The article “How to Choose a Financial Planner” covers this subject well.  Most financial planners who work for investment management firms make their money by selling you investments.  While this approach can work well, you will almost certainly pay much more for the service than is necessary.  Once you invest with a money management firm, whether using mutual funds or individual investments, you will pay a percentage of the invested assets every year. This is true even for the money you have invested in the SIS Pension Fund.  The difference in having your money invested in the SIS Pension Fund is that you are paying Institutional (wholesale) prices rather than retail prices.  In 2006, the expense ratios of the SIS Pension Fund range from a low of 0.38% for the Capital Preservation Fund to a maximum of 0.68% for the Maximum Growth Fund.  It is unlikely that you will find a retail IRA with lower expense ratios, especially if you are looking for personalized financial planning services. 


A financial plan might cost you $1,000 to $2,000.  But remember that 1% of $250,000 is $2,500 and you will pay 1% or more every year if you invest with most high quality investment firms.  You have a lot of money; seriously consider whether you could benefit from a professional financial plan.


If you are generally happy with the investment options available with the SIS Pension Fund, you can choose to leave it in the SIS Pension Fund even after you retire.  Whatever portion of your money remaining in your account is invested based on the Life Stage Fund in which you are invested.  The Trustees encourage you to leave your SIS Pension money in the SIS Pension Fund until you are ready to withdraw all or a part of it.  The IRS will make you withdraw at least a minimal amount each year once you reach age 70 ˝.


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External Links

How to Choose a Financial Planner

Investopedia – Risk

Fixed Income