Retirement question — open letter to client
Dear M and J,
Regarding your retirement question
here is some information to help you make a decision.
Taking a lump-sum distribution can be detrimental.
Mainly because “emergencies” always seem to pop up (for all of us).
And before you know it, you’ve spent all the money you had.
Leaving you with nothing for retirement.
Additionally, because these are pre-tax money (meaning this income has never been taxed)
you would have to pay tax when you take the lump-sum distribution.
And that would put you in a higher income tax bracket.
Here are some choices that would not trigger any high taxes for you.
And would keep your money safely tucked away for retirement.
- IRA account.
Open either a traditional IRA or a SEP IRA and have the pension rolled over into that account.
You can then continue to make pre-tax contributions every year.
(When you have available funds, of course).
- Solo 401(k) Plan
This plan is designed for self-employed/individual business owner.
It’s available to the spouse as well.
And you can save higher amounts to this type of plan. (Again, when funds are available.)
- Monthly payments
You can keep the money where they are and take monthly payments.
As long as the monthly payment provide a good ROI (return on your investment).
If not then either option 1 or 2 would be a better choice.
Fidelity, Vanguard, and others offer IRA’s and Solo 401 (k)
You can decide to stay with Fidelity (where your pension is now) or check out the other guys.
Make sure you find out about fees (if any) to maintain any of these retirement plans.
Even more importantly, make sure their retirement plans allow the rollover (of your pension).
Hope this information makes it easier for you to make a decision.
Wishing you the best,
* * * * *
Hope this letter helps those of you who are in a similar situation.
Wishing you success in all you do.
Thanks for visiting.
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