{"id":13702,"date":"2013-09-20T14:58:08","date_gmt":"2013-09-20T18:58:08","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2013\/09\/should-you-take-a-pension-buyout.html"},"modified":"2017-11-08T11:08:45","modified_gmt":"2017-11-08T16:08:45","slug":"should-you-take-a-pension-buyout","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2013\/09\/should-you-take-a-pension-buyout\/","title":{"rendered":"Should You Take A Pension Buyout?"},"content":{"rendered":"
\n
\n\"mark\n<\/div>\n
Mark A. Sissons, financial planner with Edward Jones Financial in Glens Falls\n<\/div>\n<\/div>\n

By Mark A. Sissons<\/p>\n

Have you recently received a pension
\nbuyout offer? If so, you need to decide if
\nyou should take the buyout, which could
\nprovide you with a potentially large lump
\nsum, or continue accepting your regular
\npension payments for the rest of your life.
\nIt’s a big decision.<\/p>\n

Clearly, there’s no “one size fits all” answer.
\nYour choice needs to be based on your
\nindividual circumstances. So, as you weigh
\nyour options, you’ll need to consider a variety
\nof key issues, including the following:
\n\u00e2\u20ac\u00a2 Estate considerations. Your pension payments generally end when you and\/ or your spouse dies, which means your children will get none of the money. But if you were to roll the lump sum into an Individual Retirement Account (IRA), and you don’t exhaust it in your lifetime, you could still have something to leave to your family members.<\/p>\n

\u00e2\u20ac\u00a2 Taxes. If you take the lump sum and roll the funds into your IRA, you control how much you’ll be taxed and when, based on the amounts you choose to withdraw and the date you begin taking withdrawals. (Keep in mind, though, that you must start taking a designated minimum amount of withdrawals from a traditional IRA when you reach age 70\u00c2\u00bd. Withdrawals taken before age 59\u00c2\u00bd are subject to taxes and penalties.) But if you take a pension, you may have less control over your income taxes, which will be based on your monthly payments.<\/p>\n

\u00e2\u20ac\u00a2 Inflation. You could easily spend two or three decades in retirement — and during that time, inflation can really add up. To cite just one example, the average cost of a new car was $7,983 in 1982; 30 years later, that figure is $30,748, according to TrueCar.com. If your pension checks aren’t indexed for inflation, they will lose purchasing power over time. If you rolled over your lump sum into an IRA, however, you could put the money into investments offering growth potential, keeping in mind, of course, that there are no guarantees.<\/p>\n

\u00e2\u20ac\u00a2 Cash flow. If you’re already receiving a monthly pension, and you’re spending every dollar you receive just to meet your living expenses, you may be better off by keeping your pension payments intact. If you took the lump sum and converted it into an IRA, you can withdraw whatever amount you want (as long as you meet the required minimum distributions), but you’ll have to avoid withdrawing so much that you’ll eventually run out of money.<\/p>\n

\u00e2\u20ac\u00a2 Confidence in future pension payments. From time to time, companies are forced to reduce their pension obligations due to unforeseen circumstances. You may want to take this into account as you decide whether to continue taking your monthly pension payments, but it’s an issue over which you have no control. On the other hand, once your lump sum is in an IRA, you have control over both the quality and diversification of your investment dollars. However, the trade-off is that investing is subject to various risks, including loss of principal.<\/p>\n

Before selecting either the lump sum or the monthly pension payments, weigh all the factors carefully to make sure your decision fits into your overall financial strategy. With a choice of this importance, you will probably want to consult with your financial and tax advisors. Ultimately, you may find that this type of offer presents you with a great opportunity — so take the time to consider your options.<\/p>\n

Mark A. Sissons is a certified financial planner with Edward Jones Financial in Glens Falls.<\/p>\n","protected":false},"excerpt":{"rendered":"

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