- FINANCIAL PLANNING
- OUR BANK
Let's compare taking a lump sum distribution and rolling it over to a traditional IRA from which you receive a monthly annuity, versus receiving a monthly annuity from your employer. If you desire a fixed monthly income over a specified number of years, your choice of lump-sum versus employer annuity may depend on a comparison of the after-tax monthly income that could be achieved. For example, compare your company's annuity payment with the annuity payment you could generate if you managed your own money by rolling over your qualified plan money to a traditional IRA. The choice between the two alternatives is based on the rate of return that can be obtained from each, since that is the major variable that can cause a difference between their results.
Janet can retire and receive monthly annuity payments from her employer of $1,625, or she can take a lump-sum distribution of $200,000. If she rolled the money into a traditional IRA earning 6% and paid herself a monthly payment for 25 years, Janet could receive benefits of $1,289 monthly. Under these circumstances, receiving the employer's benefit is preferable. But if Janet thought she could make 10% on the money and had a 15-year life expectancy, she could pay herself $2,149 monthly, a better payout than her employer.
IMPORTANT NOTE: Be very careful with the lump-sum versus employer annuity analysis not to use more optimistic rates of return than you can actually earn on the money you are managing.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Heartland Bank and Heartland Planning Associates are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Heartland Planning Associates, and may also be employees of Heartland Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Heartland Bank and Heartland Planning Associates. Securities and insurance offered through LPL or its affiliates are:
|Not Insured by FDIC or Any Other
|Not Bank Deposits or
The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.