Many retirees depend on a pension to cover day-to-day and unexpected
expenses, such as health emergencies or home repairs. Some retirees with
pensions are facing financial challenges and have responded to ads for
cash advances on their pensions. Although pension advances may seem like
a “quick fix†to your financial problems, they can eat into your
retirement income when you start paying back the advance, plus interest
and fees.
A pension advance is a cash advance in exchange for a portion, or all,
of your future pension payments. Pension advance companies typically
charge high interest rates and fees and often target government retirees
with pensions. Military retirees and veterans who receive monetary
benefits from the Department of Veterans Affairs (VA) have been offered
pension advances even though it’s illegal for lenders to take a military
pension or veterans’ benefits.
Here are 3 things you can do to protect your retirement pension:
1. Avoid loans with high interest and fees. Pension advance companies
may not always advertise their fees and interest rates, but you will
certainly feel them in your bottom line. Before you sign anything, learn
what you are getting and how much you are giving up.
2. Don’t sign over control of your benefits. Companies sometimes
arrange for monthly payments to be automatically deposited in a newly
created bank account so the company can withdraw payments, fees and
interest charges from the account. This leaves you with little control.
3. Don’t buy life insurance that you don’t want or need. Pension
advance companies sometimes require consumers to sign up for life
insurance with the company as the consumer’s beneficiary. If you sign up
for life insurance with the pension advance company as your beneficiary,
you could end up footing the bill, whether you know it or not.
