12 A Deeper Look at the Promise of Pensionization Revisiting the Two Gertrudes

Do you remember the two Gertrudes we told you about in the Introduction? Recall that both Gertrudes are 85 years old and in good health, but Gertrude 1 pensionized part of her nest egg when she hit retirement, while Gertrude 2 did not. As a result, in the later years of her retirement, the first Gertrude lives a life free of financial worry, while the second Gertrude is haunted by the complex financial decisions she faces with each passing year.

In the Introduction, we asserted that Gertrude 1, with pensionization, is better off than her counterpart. Pretty bold, right? In this chapter, we’re going to back up that assertion by looking much more closely at our two Gertrudes—one who pensionized and one who did not. And we’re going to point you toward some calculators and tools that will help you delve more deeply into your own situations. (Before we start, we want to advise you to think about this chapter as kind of an “advanced credit” section of the book, because we are going to introduce a number of technical concepts that supported Gertrude’s decisions. However, we think these concepts help in understanding the decisions that retirees increasingly need to consider, so we invite you to keep reading!)

When we met both Gertrudes, they were 85, but Gertrude 1 had pensionized part of her nest egg at age 65, twenty years earlier. Gertrude 1 clearly believed that she would be better off by pensionizing. ...

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