RE/MAX 440
John F. O'Hara

John F. O'Hara
731 W Skippack Pike  Blue Bell  PA 19422
Phone:  610-277-4060
Office:  215-643-3200
Cell:  267-481-1786
Fax:  267-354-6973

My Blog

Nearing Retirement? How to Navigate Pension Payouts

January 21, 2016 1:03 am

Those fortunate enough to have pension plans have payout options come retirement. It’s important to understand those options in order to make informed decisions—and choosing the right option for you can help ensure financial security in retirement.

“Retirees are increasingly being faced with the difficult one-time choice to either take their pension payments in a lump sum or as a lifetime income stream,” says Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB). “Clear information about the trade-offs they face can help consumers make the right financial decision for their retirement security.”

Many employees in the private sector are covered by defined benefit pension plans in which retirement benefits are typically based on years of service and earnings, and paid out in the form of lifetime monthly payments. Increasingly, employers are giving consumers eligible for retirement benefits the option of a one-time payment for all or a portion of their pension, commonly known as a lump-sum payout.

The monthly payment option offers steady lifetime income, which substantially reduces the risk of running out of money later in life. This is especially important if you or your spouse is in good health, or if either of you have a family history of longevity. A lump-sum payout, however, might make sense if you or your spouse is terminally ill or in critically poor health, or if you already have sufficient income to cover basic living expenses.

If you choose a lump-sum pension payout instead of monthly payments, the responsibility for managing the money shifts from your employer to you. In the monthly payment option, you don’t need to worry about a lack of investment skills, or how your financial management skills may change as you age. In contrast, a lump-sum payout can give you the flexibility of choosing to pay off large debts, where to invest or save the money, and when and how much to withdraw.

Keep in mind that pensions are typically insured by the Pension Benefit Guaranty Corporation (PBGC). In the event your company declares bankruptcy or otherwise cannot make its pension payments, the PBGC guarantees those payments up to a certain amount. Pension payments are also protected against certain creditor claims or debt collectors. With a lump-sum payout, you lose these protections.

If you elect the lump-sum option, it’s important to check for calculation errors. Many factors determine a lump-sum payment amount, including age, years of work, earnings history, taxes withheld, and the terms of the plan. You can detect errors by taking a look at your most recent pension statement, or by contacting a pension counselor for assistance or to resolve errors.

The lump-sum option also means you’ll have to pay taxes on the payout. This money is generally treated as ordinary income for that year. For this reason, an employer is required to withhold 20 percent on the amount.

In addition, you may have to pay a 10 percent early withdrawal penalty tax if you have not reached age 59½. You can defer income taxes on your lump sum by rolling over the funds into a qualified retirement account.

Source: CFPB.gov

Published with permission from RISMedia.


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4 Hacks to Supersize a Tiny Bathroom

January 21, 2016 1:03 am

Bathroom remodels require their fair share of the stake, and if you have a tiny bathroom, that can mean forking over big bucks solely for demolition. Yikes!

But before you knock down any walls, consider these supersizing tricks professional remodelers use—without actually increasing square footage:

• Tile size and pattern can either grow or diminish spaciousness. Conventional wall tiles are 4-inches by 4-inches, which, to the eye, appear smaller than they should. To increase the sense of space in the bathroom, use bigger, glossy wall tiles, like ceramic or granite, in a largely uninterrupted pattern.

• Lighter colors create the impression of more space. To play into this effect, select floor tile that are lighter in color, and arrange them diagonally to give the illusion of more space.

• Tiny bathrooms lack the space for a full-sized bathtub, so don’t try to squeeze one in. Instead, install a compartment shower with glass walls. These allow the occupant to see the room wall to wall, without their line of sight cut off by a curtain or door.

• Strategically-placed lighting can also add spaciousness. To make the most of your tiny bathroom, install wall fixtures, rather than overhead lighting. Wall lighting illuminates the bathroom at eye level; overhead lighting can cast shadows, lending a cramped feel to the space.

Source: Cornerstone Design & Remodel

Published with permission from RISMedia.


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