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Pension/401k Questions?

If you have qualified for an employer-funded pension plan, congratulations; you are among the lucky ones. Your pension plan is a unique and important asset that requires informed decision-making; this is especially true if you are getting ready to retire, or if your employer discontinues the plan. A Shankland Financial advisor can help you assess the potential of your pension plan and chart your best course of action going forward. There are many choices to make: for example, you may have the option to receive a lump sum payout and roll it tax-free into an IRA rollover, or you may be able to roll a lump sum into a 401K with your employer. You can also choose to begin a pension income.

These decisions have the potential to critically impact the quality of your retirement. Your Shankland Financial team can help you make sound choices by analyzing the variables relevant to your particular situation. Your Shankland Advisor team will help you understand how your pension, 401K, and Social Security work together inside your family budget in retirement.

A pension plan is generally designed to give you a guaranteed income stream over the course of your retirement; our professional financial advisors can illustrate several potential payout options for you to consider. If you are a married, you may choose a reduced pension to protect your spouse’s access to your pension benefit upon your death. This would protect your household from a sudden drop in income from happening at the same time that your spouse would lose a social security payment.

If you are offered a lump sum payout, you will need to examine what you could do with the money outside of the plan to create retirement income and minimize your tax burden.

An IRA rollover is easily completed when you work under our team’s direction and have an event allowing a rollover to occur. Once you turn 59 ½, many plans allow you to do an “in-service distribution” and move the money to an IRA rollover at the custodian of your choice (Shankland Financial prefers industry front-runner TD Ameritrade). A pension plan rollout is also generally allowed if a plan is frozen and then discontinued by the employer.

You are likely to find that, with good planning, you can achieve very close to the income which the company plan would pay you if you took the illustrated traditional pension payout. There are some key reasons you should look at utilizing the strategy of rolling out your lump-sum payment and getting it under your control inside of an IRA rollover.

One issue is that if you elect to stay with the company pension option, it cannot be amended by you once it has been initiated. You are, in effect, never in control of the funds. A pension can guarantee a joint payout for both you and your spouse throughout your lifetime, but many plans provide neither the potential for an increase in income during your retirement nor the ability for you to withdraw extra cash in an emergency.

If you elect a joint payout from the pension, you should know what happens when you and your spouse both pass away. In most instances, your heirs would get no payout at all from the plan. Any remaining dollar value would revert back to the plan. However, if you have the funds under your control outside of the plan in your own IRA rollover account, your heirs would receive whatever value is left in the IRA. Maintaining family control over these assets should be incorporated into your financial plan because there can be substantial assets in these accounts. Not getting control of those funds when you have a chance to do so can create serious financial repercussions.

It is important to note that creating an IRA rollover provides the added advantage of having your funds invested in a way that is consistent with your individual risk tolerance. Some money can be invested for growth, and some can be invested with principal guarantees. Our advisors will work with you to carefully assess your risk tolerance and tailor your account(s) in a way that provides you easy access to your funds and the opportunity to adjust your withdrawals as needed. You can cover the issues of inflation and retirement expenses more readily because you can invest in a much wider variety of financial instruments than a 401k or company plan can offer. If you experience growth over time, you can readily adjust your income payments and have access to principal. We can help you set your rate of withdrawal to a level that ensures your funds lasting throughout your retirement and, beyond that, to create a lasting legacy if that is your desire. You can have your own tailored mix of growth assets and guaranteed income so that you are always in control.

Our advisors work one-on-one with you to create your portfolio and then we manage your account with our discretionary trading capability. We look at your entire financial picture to coordinate our management with the other financial assets you have in place individually and within your family.

Should you decide to roll your funds into a 401k offered by your employer, a Shankland Financial advisor may be of particular benefit to you because your employer is not allowed to advise you on which funds to choose within the plan. We can help you choose the best-performing and most appropriate funds for your risk profile. We can also monitor your account and do the fund reallocation trading for you if you desire. Be sure to speak with us about this option if you are going to have any funds held inside a 401k. Company contributions can help you grow the account value for your retirement, and they want you to participate. We can ensure that you get the full employer match available as a benefit from the company.

As outlined above, there is a lot to consider with pension plans, 401k’s, and IRA rollovers. We invite you to contact us for personalized guidance in these matters so that you can make the most informed decisions possible. We offer private consultations free of charge in person and remotely. We serve clients from all over the country from our offices in the Chicago area and Western North Carolina. Set up a retirement plan consultation today by calling us at 833-742-6534, ext.0.