There is no stress when the check is in the mail

Written By:
Van Pappas, CFP

These days there are fewer and fewer companies offering pension plans.  If you are fortunate to have one, you might find a letter in the mail one day from your pension manger with what looks like an attractive lump sum buyout.  Most times the amount of the lump sum payout could be the biggest check you will ever see.   They offer these buyouts as a way to reduce the impact on the company’s financials, by shrinking the size of their pension obligations.

One of the issues is that if you take the lump sum personally, rather than rolling it into an IRA, you will have to pay income tax on the entire amount and this could push you into a higher tax bracket.  Once you elect to take the offer, you cannot undo it.

Look at the monthly payment options available and calculate the performance you may need to make to potentially get a similar payment if you take the lump sum (ask your Private CFO™ for help on the math calculation).  Rolling the money to an IRA would give you investment flexibility and if you did not need the income stream, can be a way to leave a financial legacy to your beneficiary.

By giving up the guaranteed income payments, you might find your retirement very stressful.  Whatever you invest, the investments will be subject to market fluctuations, changing market values of your assets and will not have guarantees of performance.

Do you want to be watching the market everyday or living your retirement knowing you have income to live on?   Make your smart money move by deciding what kind of retirement you want to lead.

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