Many companies have recently begun offering employees and retirees the daunting choice of taking their pension in a lump sum. The option could mean more retirement income flexibility, more retirement income, protection from inflation, tax savings, and a larger inheritance to leave to heirs. Or it could lead to running out of money. It’s a difficult choice and there is no simple answer.
|Locally, Ford and GM have both made offers but our white paper addresses issues common to anyone facing the lump sum pension decision. In our piece, Ford/GM Pension Lump Sum Choice: Risks & Considerations [pdf], we look at many factors that may come into play from the math to your personality. We consider the impact of inflation on fixed payments, the potential risk of losing the monthly payments to bankruptcy, as well as the investment market risks and investor behaviors that can be costly. Your age, health, marital status and even your gender may play into your decision as well. The article wraps up with a pros and cons chart but, in the end, it will be best to consult a professional (see our other piece, Frank Advice on Choosing a Financial Advisor).
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A Piece of Your Overall Retirement Plan
Your overall retirement income plan may include your 401(k) balance, your spouse’s assets or pension, and Social Security in addition to the pension or lump sum option. A comprehensive look at your overall financial status will help you understand your position much better and can help lead you to the best choice for you. Our team at Vintage is here to help. We offer a complimentary initial meeting where we can answer many of your questions. If you decide you’d like a more thorough analysis we can prepare a financial plan that looks at your retirement income, net worth, investments, estate planning, taxes, insurance and more. If you opt to become one of our clients there’s not even a charge for the plan and, if you decide not to work with us, the fee is just $500, a fraction of what many CFPs charge. Feel free to contact our office with any questions or to arrange for an initial meeting.