List of Partners vendors. So you are on the verge of retirement, and you are faced with a difficult choice regarding the defined-benefit pension plan you are fortunate enough to have: Should you accept the traditional, lifetime monthly payments or take a lump-sum distribution instead?
Understandably, you might be tempted to go with the lump sum. After all, it may be the largest single disbursement of money you will ever receive. Before you make an irrevocable decision about your future, take the time to understand what the options might mean to you and your family.
A lump-sum distribution is a one-time payment from your pension administrator. By taking a lump sum payment, you gain access to a large sum of money, which you can spend or invest as you see fit.
A pension payment annuity "is fixed occasionally COLA-indexed , so there is little flexibility in the payment scheme. But a year retirement probably faces some surprise expenses, possibly large. The lump sum, invested properly, offers flexibility to meet those needs and can be invested to provide regular income, too.
Your decision may affect your children, as well. Do you want to leave something to loved ones after your death? Once you and your spouse die, the pension payments might stop. On the other hand, with a lump-sum distribution, you could name a beneficiary to receive any money that is left after you and your spouse are gone.
Income from pensions is taxable. However, if you roll over that lump sum into your IRA, you will have much more control over when you remove the funds and pay the income tax on them. It will allow you to take distributions according to your required minimum distribution RMD , which in many cases, would be lower than your planned pension payments.
If you want to minimize your taxes, rolling your pension into an IRA will allow you to plan when you take your distributions. Thus you can plan when and how much you want to pay in taxes. A regular pension payment is a set monthly payment payable to a retiree for life and, in some cases, for the life of a surviving spouse. Some pensions include cost-of-living adjustments COLA , meaning payments go up over time, usually indexed to inflation.
Some argue that the main feature people like about lump-sum payments—flexibility—is the very reason to avoid them. Sure, the money is there if you have a financial need.
But it also invites overspending. With a pension check, it is harder to splurge on purchases you might later regret. A lump sum also requires careful asset management. If your pension is also supporting a partner or someone else, remember to take their expenses into account as well. What other income you'll have. For example, from other savings and investments. How the benefits system could change , particularly if your retirement is a long way off.
If things change during your working life, remember to review your pension plan. Your State Pension age. This is the age at which you'll be able to claim State Pension. How much you'll need to save for a pension You can use the Money Advice Service pension calculator to estimate the amount of pension income you could get from a personal, stakeholder or workplace pension when you retire.
If you can't afford to save for a pension If you don't think you can afford to save for a pension, don't worry. Reviewing your pension needs As you go through your working life, things may change.
It's important to review your pension situation regularly, particularly when there is a change in your circumstances, for example: when you get married or divorced if you change jobs if you can't work for any reason If you are saving for a partner, remember to review their pension situation and needs as well.
Pension scams Pension scams have become more common since April , when new rules allowed people to take some or all of their pension pot as a lump sum. Other sources of pensions advice GOV. UK GOV. NI Direct NI Direct has information about pensions and retirement planning , including personal, stakeholder and workplace pensions. Their website has: comparison tables for choosing a personal pension provider and a pension calculator for working out how much pension you'll need a range of leaflets to help answer your pensions and retirement questions The Pensions Advisory Service TPAS The Pensions Advisory Service TPAS is an independent organisation that provides free information, advice and guidance about all types of pensions.
You can can call TPAS on TPAS doesn't provide financial or investment advice or recommend products. Did this advice help? Yes No. Why wasn't this advice helpful? It isn't relevant to my situation. It doesn't have enough detail. I can't work out what I should do next. I don't understand. You've reached the character limit.
In most cases, you will get your first pension payment about two to three weeks after your pension effective date. Your pension effective date is the first day of the month after you stop working for your employer. For example, if your last day of work is September IMRF wants to start your pension payments as soon as possible, so your first few pension payments will be estimated amounts until we receive your final wage information from your employer.
You are always eligible for the Standard pension option. If you are eligible for any additional pension payment or retirement refund options in addition to the Standard pension option :. You can access up-to-date information about your monthly deposits through your Member Access account.
To view the amount of your direct deposit, first click here to sign into your account. If you don't yet have a Member Access account, click here to create your account today. If you do not have an eligible spouse when you retire married or in a civil union for at least one year before you stopped participating in IMRF, and still married to this spouse on your pension effective date , IMRF will refund your surviving spouse contributions, with interest.
You can either:. Your pension effective date is the official date that you are considered an IMRF retiree. Consider how this might affect you. Do you have enough guaranteed income in retirement?
If you rely on this to provide you with an income, you might have to reduce the amount you take if your pot falls in value. Otherwise, you risk your money running out if you live for longer than you expected.
You can also take a flexible income from other savings or investment, but you need to monitor how much you take to make sure they last. If you need help making sense of how and when you can access your pension pot, you can speak to someone from Pension Wise, a free service from Money Helper.
Book your free appointment. MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper. Download app: WhatsApp. For help sorting out your debts or credit questions. For everything else please contact us via Webchat or telephone.
Got a pension question? Our help is impartial and free to use. Get in touch online or over the phone on Benefits if you have children Entitlements to help with the cost of pregnancy or bringing up children. Benefits if you're sick, disabled or a carer Understand what support is available for coping with ill health.
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