If you’re like many people, you may want to retire early, but your pension is set up so that you can’t tap into the money until you’ve reached a certain age. Or perhaps you want to make sure you and your spouse can continue your current lifestyle after you’ve retired, but you’re afraid your pension won’t allow you to do that. There are steps you can take to ascertain that your pension will provide the funds you need, when you need them.

You can convert your pension to a lump sum through a buy-out if you want to take early retirement. To do this, you’ll need to calculate its present value, that is, what it would be worth on the day you want to convert it. The calculations would include the number of years the pension is due to be paid out and the interest rate that would be paid on the pension. Using a series of calculation steps, you can determine the figure you’d receive if your pension were paid today in a lump sum. You can follow the formula yourself or ask your investment counsellor to do it for you.

Conversely, you may be asking yourself if your pension will provide the income you want when you retire. Conventional wisdom says that a comfortable retirement requires about 20 years of savings at your current salary. However, this is often unrealistic. What you want to know is whether your pension plan will run out before you die, and if you need to step up your savings plan.

First you’ll need to determine your expected monthly expenses after you retire. You need to include basic needs such as housing and transportation. Don’t forget to add in health care costs. Then you’ll want to add in extras such as travel, home upgrades, hobbies or similar costs. Then you’ll need to calculate the income you can expect from the pension, other retirement savings plans, Social Security and investments. If your estimated expenses far outpace your income, don’t panic. You have several options. You can start saving more now, change the ways you’re investing or scale back your anticipated lifestyle.

Knowing what your pension is worth and deciding whether you want a pension release or what it will take to retire comfortably is critical, even if you have just a handful of years before you reach retirement age. You’ll be able to make informed decisions in a timely and judicious manner instead of reacting quickly and foolishly if you find your pension doesn’t meet your needs.