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Pensions
Municipal Pension Minutia
By Michael Chadwick
President, Chadwick Financial Advisors
The state and local governments are getting pretty slick at enticing our civil servants to take pensions early, based on emotion. As a general rule, you never want to make financial decisions with emotion. You want to operate only in the realm of logic and reason. What the new employer trend is to take a particular topic and heat it up emotionally to take the focus off of the real issue.
Most recently many employers have used this negotiation tactic to drive people to make emotional decisions that are actually in the best interests of the employer, not the employee. When you go to make such decisions, try and protect your interests along with your families. If you don’t feel 100% comfortable in the decision making process please call the office and consult us prior to signing on the dotted line. We’ve seen several people who have come to see us after making such a decision, an unfortunately irrevocable decision. At that point in time there is nothing that can be done to change it so for that individual the point is moot. Others can still be helped and educated so they are not duped into making the same mistake. If anyone you know and care for is in this type of situation have them call us so we can help them sort it out and protect their interests.
We’ll often get the question as to what should be done with pensions when it comes to cash out or annual payments. The answer lies in the numbers and your risk tolerance. Once we have the numbers we can calculate what method is more beneficial for you based on how you would like to invest the money. Some feel warm and fuzzy inside if they are just getting a monthly payment on a guaranteed basis. You can get that payment on your own or through the pension plan. Other people feel they are better served if they can control the principal and when they are done, leave it to their heirs or a charity. You’ll likely get a better lifetime income stream if you choose to control the cash. Whatever you choose, be sure your decision is an educated one.
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