In today’s unpredictable economy, many companies are offering their employees buyouts as a way to shrink the size of their pension plans and ultimately reduce their longterm financial obligations.
This practice of culling off the heard in the marketplace presents two options for those who are presented with a buyout, a lump-sum payment or holding on to your pension plan. These options then lead to the question: Which option is best for you?
America’s Wealth Coach Deborah Owens recently spoke with Roland Martin on NewsOne Now about why some should and why others should not take the lump-sum payment and head on to greener pastures.
The financial guru said if the lump-sum option “sounds too good to be true, it usually is.”
“You want to look at what is that monthly benefit for life” when making a decision of this magnitude. So before you take the leap with the lump-sum payout, Owens offered a list of things to consider:
- What is the monthly benefit for life of your pension plan?
- How many payments would the lump-sum payout provide?
- How much risk do I have to take to get the same return if I roll the money into an IRA?
Owens suggested those individuals who are presented with the lump-sum versus life-time annuity should conduct a “cost benefit analysis” of the two options, detailing “what you’re giving me right now versus the monthly benefit I’m going to get.”
In taking the topic of retirement savings a step further, Owens brought to the forefront a phenomenon that is taking place with Blacks in the workforce. “What is happening particularly to African-Americans is we’re seeing leakage as it relates to retirement plans.”
A study conducted by Ariel Capital and Aon Hewitt found that there is a significant gap between African-American retirement funds and those of their White counterparts.
Watch Roland Martin, Deborah Owens, and the NewsOne Now panel discuss retirement savings in the video clip above.
For more information, visit deborahowens.com/newsonenow
Watch NewsOne Now with Roland Martin, in its new time slot on TV One.
Subscribe to the NewsOne Now Audio Podcast on iTunes.
PHOTO CREDIT: Getty
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