"Explorations of the Insurance Policy Zone

Effective retirement income planning does not only require adequate sources of income for that period, but also the proper management of your money to ensure a nest egg that lasts as long as you live. Here are some tips on managing the money Social Security and your pension plans owe you:

Handling Your Social Security Benefits

Even if it seems you have it made with a portfolio that has a good mix of safety and growth potential, it is mostly a good idea to retire later for larger Social Security benefits. This is because of the way Social Security payments are calculated. Your highest-earning 35 years of working are adjusted for inflation, and then averaged out to amount to what you will receive in monthly benefits. If you retire early, there is a chance that some of those years will be considered as having zero earnings, effectively bringing down the earnings average (and your monthly benefits).

For instance, an individual who has made an average of $60,000 per year over those 35 years will get payments based on that amount. If you have only worked for 30 years in your entire lifetime and retire early, your benefits will be calculated as the average of that period plus the five years without earnings. Your best-years average will drop to just about $51,000, considerably lowering your overall payouts.

Managing Your Pension Payments

First up, you will need to determine how you will receive your pension benefits. While others may attempt to predict the future and base their decision on their possible state of finances at that time, some experts recommend taking a lump-sum payout (in contrast to regular payments) for more monetary control and leeway. After making the decision, ensure that the pension provider places your lump-sum benefits into an account such as an IRA, which helps you avoid the drain that comes with considerable withholding taxes.

After rolling over your pension into an IRA, you will usually be better off leaving it untouched until you reach 59.5 years of age so you will not have to pay a penalty and some taxes. In some cases, though, early withdrawals without additional charges may be made for medical expenses or disability.

A nest egg with numerous sources of income will only be stable if you manage withdrawals from your income sources properly. For more tips on retirement income planning and money management concerns, contact your investment advisor.

About the Author:

Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives seniors reliable investment options to help them strengthen their retirement income planning strategy. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com/solutions/retirement_planning.

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