Lifestyle Education
About to receive a pension distribution from your employer? What should you do?
Caution: How you handle your pension distribution may impact the pension funds you'll rely on for the next 20 to 30 years of retirement.
First, you'll want to place your lump-sum distribution in the financial vehicle best suited to meet your retirement goal. Secondly, you'll want to minimize the amount of federal and state taxes and Internal Revenue Service penalties you will pay.
You could receive the lump-sum distribution in a check, but your employer will withhold 20 percent from the total to apply toward federal taxes. And if you're not yet age 59 1/2, you may incur an additional 10 percent premature distribution penalty.
You could roll the funds into a certificate of deposit, but that's a temporary solution. When the CD comes due, you'll once again have to decide what to do with the funds.
A better option may be to roll the funds into an IRA. The funds you place in an IRA grow on a tax-deferred basis under current tax laws and are not taxed until the money is received, often when your income is lower and taxed at a lower rate. Additionally, IRAs have flexible funding guidelines, so you can choose from annuities, mutual funds and other investment products.
How can I keep my family in its home if my spouse or I die?
That's an important question, especially since most families depend on one or both pay checks to make the mortgage payment today.
Life insurance can help assure your family remains in its home if you or your spouse die.
Permanent life insurance, in an amount equal to or greater than the mortgage, can provide funds needed to pay off the mortgage if you die prematurely. As your mortgage balance decreases, the proceeds from your permanent life insurance contract can be used to help pay off the mortgage, cover final expenses or provide an income for your surviving spouse and family.
College Saving: Four Simple Steps
Don't be discouraged by the rising costs of education. You can reach your college savings goal with these simple steps.
1. Start now
It's never too soon to start saving! Investing a small amount of money each month toward your educational goal can help increase your savings over time.
2. Save systematically
Make it a part of your monthly budget to set aside enough money. Consistent saving will pay off in the long run. Through payroll deductions or automatic withdrawals from your bank account, you can save money for college each month before you have the chance to spend it on something else.
3. Explore your options
If your child is approaching his/her sophomore year in high school and you don't have enough money saved to afford full tuition, it's time to explore other options, such as financial aid, scholarships, student savings and a second job.
4. Protect your college dreams with insurance
Premature death or disability can devastate even the most carefully thought-out college savings plan. You can protect your loved ones. educational goals by having enough life and disability income insurance to complete your college savings plan no matter what happens. You can even take advantage of a life insurance product that builds cash value to assist with your college expenses.
Are you counting on Social Security to support you in retirement?
If you are, you'll probably find that your Social Security payments fall far short of meeting your entire retirement income needs. You see, the federal government never intended for Social Security to provide an individual's only income source during retirement. Social Security's main purpose is to provide enough income to keep an individual out of poverty.
When planning for retirement, look to three sources of income for a balanced retirement plan. Social Security, personal pension plan and personal savings. The only source that you can completely control is personal savings.
Three ways to supplement your personal savings for retirement are life insurance, annuities and investment products. While the main purpose of life insurance is to provide a death benefit protection, some life insurance plans allow a cash value to build in the contract. Some people use these cash values to supplement retirement income.
With annuities and other investment products, you can begin setting aside money today for your retirement. Money placed in an annuity grows on a tax-deferred basis under current tax laws, offering shelter for your hard-earned dollars. Investment products can be appropriate for all types of investors and may enhance your personal savings plan by providing diversification, balance and superior potential returns.
Kristine V. Barager, FIC
District Representative
Modern Woodmen of America
kristine.v.barager@mwarep.org
(719) 532-0570
