Podcast Episode 294: Retirement Income Questions

Retirement brings with it an exciting time of life, but also the challenge of figuring out how to make ends meet in retirement. Retirement income is an important factor in planning for retirement and there are many options available to ensure that retirees have the funds they need. From Social Security, pensions, and lump sums, you need to know how it all fits together in the most tax-efficient way possible.

We have three questions on our podcast today and two of them ask about retirement income and the best way to take payouts. So let’s address them.

The first scenario we discuss on the show is one that many people have been facing over the past few years. Should you take a severance package and pension buyout offered by your company or continue to work a few more years and get the monthly pension payments?

The first thing you have to answer is are you ready to retire? Then you need to determine what the full pension is going to be versus the pension buyout. You have to consider that a pension pays you every month while the buyout means you get a nice check now but you’re going to be responsible for managing that money. Every company is different but whatever you decide is irrevocable so take your time and make sure you’ve weighed your options.

The second question on the show comes from someone who has built up 18 weeks of vacation and sick time that they’ll get paid out on when they retire at the end of the year. With taxes in mind, would it be better to delay retirement by a month so that the payment comes in the new year?

The short answer is probably yes. If you’re retiring at the end of the year, it like makes more financial sense to wait until the next year to take that lump sum. You’ll want to look and get an idea of what your income will look like over the next year as well as the tax brackets that you might fall into depending on that lump sum. Once you’ve run those numbers, you can make a determination.

The final question we tackle today is about rental properties and creating income in retirement. For someone ready to build their dream home, would they be better off selling their old house and investing the money or renting it out and generating some additional income?

There are a number of factors that go into this as it’s not an easy decision. First, you have to assume that you won’t be able to rent it for an extended period of time. Do you have the money to cover the mortgage if that happens? Ultimately though, we’re big fans of making things as easy as possible and taking care of two properties probably won’t be easy.

If you want to discuss these planning items or any others, take advantage of our complimentary Money Map review and we’ll get the process started.

Here are a few of the things we discuss in this episode:

0:14 – Should I retire in 5-6 with a pension or retire now with a severance package and pension buyout?

1:32 – I’m retiring this year and will have about 18 weeks of vacation and sick leave to get paid out for. Should I wait an extra month and retire in January instead of December for tax reasons?

2:45 – We’re building our dream home and will move in the next year or two. Should we keep our current house as a rental property or sell it and invest the cash?

4:50 – Will gold rise dramatically in a short period of time?

9:16 – Get your questions answered through your Money Map review