For many Pennsylvania educators, a pension can serve as an important foundation for retirement. But a pension may not address every financial consideration you could encounter throughout retirement.
Here are three areas educators may want to consider as part of a broader retirement strategy.
Pension benefits are generally taxable as ordinary income when received. Educators who also accumulate significant tax-deferred savings in accounts such as a traditional 403(b) may find that a substantial portion of their retirement income is subject to income taxes.
Depending on individual circumstances, Roth IRAs and other after-tax savings strategies may provide an additional source of retirement assets with different tax characteristics. Incorporating different types of accounts into a financial strategy may provide greater flexibility when managing taxable income in retirement.
Eligibility requirements, contribution limits, distribution rules, and individual tax circumstances should all be considered before implementing a Roth or other tax-related strategy.
Retirement can bring important decisions about how pension benefits and accumulated assets will be used.
For eligible Pennsylvania school employees, one consideration may be the Partial Lump Sum Option Payment (PLOP). This option can allow an eligible retiree to receive a portion of their contributions as a lump-sum payment rather than having all available benefits reflected in monthly pension payments.
There can be advantages and tradeoffs associated with this decision. Evaluating the available options in the context of anticipated expenses, other retirement assets, income needs, and long-term financial objectives can help determine how those assets may fit within an overall financial strategy.
Retirement may last decades, making inflation an important planning consideration. As the prices of goods and services rise over time, the purchasing power of income that does not increase at the same rate may decline.
A long-term financial and investment strategy can take inflation and other retirement risks into consideration while remaining aligned with an individual's objectives, time horizon, and risk tolerance.
A pension can be an important component of an educator's retirement income, but retirement planning can involve much more than determining the amount of a monthly pension benefit.
Tax diversification, access to liquid assets, inflation, investment risk, anticipated expenses, and other sources of retirement income can all play a role.
A financial professional can help you evaluate these considerations and determine how different strategies may fit within your individual financial circumstances and long-term goals.
Important Disclosures
Tyler Ruby, Jeffrey Olenych, and Shannon Kimmel are Financial Advisors offering investment advisory services through Eagle Strategies LLC, a Registered Investment Adviser.
Tyler Ruby, Jeffrey Olenych, Shannon Kimmel, and Crystal Bish are Registered Representatives with NYLIFE Securities LLC (Member FINRA/SIPC), a Licensed Insurance Agency. 935 4th Ave., Ford City, PA 16226.
Tyler Ruby, Jeffrey Olenych, Crystal Bish, and Shannon Kimmel are Agents with New York Life Insurance Company.
NYLIFE Securities LLC and Eagle Strategies LLC are New York Life companies. Ruby Financial Group is not owned or operated by NYLIFE Securities LLC or its affiliates.
Neither Ruby Financial Group nor NYLIFE Securities LLC nor any of their representatives provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.