Pension Buyouts

Let’s take a little bit of time and talk about pensions and specifically maybe pension buy outs. If you’re one of the fortunate ones that either has or will be offered a pension maybe you have some different options. One, typically with withdrawals options, you’re going to have various options depending upon usually survivor benefits or the term of time that you want to take that benefit over. Often very important things to consider especially if you’re married, how do you want to protect that surviving spouse? But what if you’re offered a lump sum option to for go those payments? Basically you can have a sum of money offered to you in leu of taking those payments over your lifetime. Wow, that’s a really interesting option and what do you do? You know there’s a lot of things you have to look at. One, withdrawal rates we call it. You know what is the rate they’re giving you off of that? The pension amount, the payment amount in comparison to that lump sum? What is that percentage? You know are they giving you a good one or is it maybe not so great and something to consider? Also then, other assets, what other assets do you have to coincide with either taking a lump sum or taking those payouts? What planning opportunities do you have with investments and to generate income? Likely you’re going to need income. That’s lifestyle in those cases. So what do you want to do with that? Taxes, obviously pension in most cases is a taxable source of income. If you take a lump sum typically that’s a pre-tax amount in most cases, so now you’re going to have an IRA in most cases. So it’s going to be taxable, right? How do we plan for that throughout time and what gives you maybe the biggest advantage in your specific circumstance? Healthcare, is healthcare tied to maybe keeping the pension or is it not relevant in that situation? Do you need healthcare planning for maybe the market place and does the lump sum or the other one give you greater options or greater flexibility? Those are all things that we need to consider. And think of it folks, a lot of times that big number can be flashy, can seem like a lot, but without the appropriate plan in place, it can be a disaster at the same time. It’s really important like most things, you weight the advantages and disadvantages with everything. There usually isn’t one perfect solution, so you have to make sure you have a plan. As we talk about all the time here on this show, holistic planning. Pensions and pension buy outs or pension withdrawals, monthly amounts are all part of a bigger picture. All these things have to be looked at at one time. Too often folks focus on one specific thing and forget about it’s a part of the bigger picture. Retirement is like 20-30 years of unemployment. How are you planning to make that a success?