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Should you take a pension buyout?

Scott-Johnson---Head  Have you recently received a pension buyout offer? If so, you need to decide if you should take the buyout, which could provide you with a potentially large lump sum, or continue accepting your regular pension payments for the rest of your life. It’s a big decision.
  Clearly, there’s no “one size fits all” answer — your choice needs to be based on your individual circumstances. So, as you weigh your options, you’ll need to consider a variety of key issues, including the following:
  • Estate considerations — Your pension payments generally end when you and/or your spouse dies, which means your children will get none of the money. But if you were to roll the lump sum into an Individual Retirement Account (IRA), and you don’t exhaust it in your lifetime, you could still have something to leave to your family members.
  • Taxes — If you take the lump sum and roll the funds into your IRA, you control how much you’ll be taxed and when, based on the amounts you choose to withdraw and the date you begin taking withdrawals. (Keep in mind, though, that you must start taking a designated minimum amount of withdrawals from a traditional IRA when you reach age 70½. Withdrawals taken before age 59½ are subject to taxes and penalties.) But if you take a pension, you may have less control over your income taxes, which will be based on your monthly payments.
  • Inflation — You could easily spend two or three decades in retirement — and during that time, inflation can really add up. To cite just one example, the average cost of a new car was $7,983 in 1982; 30 years later, that figure is $30,748, according to TrueCar.com. If your pension checks aren’t indexed for inflation, they will lose purchasing power over time. If you rolled over your lump sum into an IRA, however, you could put the money into investments offering growth potential, keeping in mind, of course, that there are no guarantees.
  • Cash flow — If you’re already receiving a monthly pension, and you’re spending every dollar you receive just to meet your living expenses, you may be better off by keeping your pension payments intact. If you took the lump sum and converted it into an IRA, you can withdraw whatever amount you want (as long as you meet the required minimum distributions), but you’ll have to avoid withdrawing so much that you’ll eventually run out of money.
  • Confidence in future pension payments — From time to time, companies are forced to reduce their pension obligations due to unforeseen circumstances. You may want to take this into account as you decide whether to continue taking your monthly pension payments, but it’s an issue over which you have no control. On the other hand, once your lump sum is in an IRA, you have control over both the quality and diversification of your investment dollars. However, the trade-off is that investing is subject to various risks, including loss of principal.
  Before selecting either the lump sum or the monthly pension payments, weigh all the factors carefully to make sure your decision fits into your overall financial strategy. With a choice of this importance, you will probably want to consult with your financial and tax advisors. Ultimately, you may find that this type of offer presents you with a great opportunity — so take the time to consider your options.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Profits & Sense from 10-17-13

  Marquette Bank, invites customers and neighbors to participate in its 7th annual Adopt-a-Soldier program, which sends care packages to U.S. soldiers serving overseas. Through Nov. 2, employees, customers and neighbors have the opportunity to donate items and to nominate Chicago area soldiers to receive the care packages.
  You can fill out a form at any Marquette Bank location to nominate a soldier to receive a care package. Collection bins are also available and requested donation items are listed below by category.
Food/Beverage
  • Bumble Bee tuna kits; canned fruit (single serving); cereal/granola/power bars; hot chocolate packets; microwavable mac & cheese and popcorn; Mi0 or Crystal Light drink mix; nuts (small bags); oatmeal (individual packets); Slim Jim beef jerky; snacks (individually wrapped); and soup (single serving).
Drugstore
  • Anti-itch/antibiotic creams; disposable razors; nasal spray; eye drops; and Tums/Rolaids.
Miscellaneous
  •Batteries (AA or AAA); Christmas cards/letters; crossword puzzle books; iTunes gift cards; mechanical pencils; new DVDs or CDs; playing cards; and socks.
  In the past, local classrooms along with Girl and Boy Scout troops have made cards and wrote letters of gratitude to soldiers. The Adopt-a-Soldier program is part of the Marquette Neighborhood Commitment, where each quarter the bank focuses on a different area of need — shelter, hunger, education and health/wellness. For more information about Marquette Bank and the Adopt-a-Soldier program, call 1-888-254-9500 or visit www.emarquettebank.com.
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  The Oak Lawn Chamber of Commerce will host the 14th Annual Business Showcase & Health Fair from 10 a.m. to 3 p.m. Saturday at Oak Lawn Community High School.
  Flu shots will be available from Advantage Pharmacy for a fee, along with free blood glucose testing and blood pressure screen. We will also have a full spectrum of healthcare providers, financial & banking representatives, home improvement specialist and more.
  The Business Showcase is held in conjunction with the Fall Arts and Crafts Fair, sponsored by the Parent-Teacher School Association. The Oak Lawn Chamber will use a portion of the proceeds from the Showcase to provide college scholarships to eligible Oak Lawn Community seniors.
  For more information, or for an exhibitor application, please call the Chamber office at 424-8300 or email office@oaklawn chamber.com. Booth fees are $85 for Chamber members and $150 for non-members.

Take advantage of open enrollment season

Scott-Johnson---Head  At many places of work, it’s open enrollment season — the time where you get to make changes to the various benefits you receive from your employer. As you review your overall benefits package, what areas should you focus on?
  Here are three possibilities:
  • Life insurance — If your employer offers life insurance as a benefit, and you haven’t already signed up for it, consider adding it during your open enrollment period — because life insurance can be important to your family’s financial security. If you already have life insurance with your employer, you may want to take the time, during open enrollment, to review your beneficiary designations. If you’ve experienced a change in your family situation, such as divorce or remarriage, you’ll want to update your beneficiaries, as needed.
  However, the amount of life insurance offered by your employer in a group policy may not be sufficient for your needs, so you may want to consult with a financial professional to determine if you should add private, or individual, coverage. You may find that individual coverage is comparable, in terms of cost, to your employer’s coverage. Also, individual coverage is “portable” — that is, you can take it with you if you change jobs.
  • Disability insurance — Your employer may also offer disability insurance as a low-cost benefit. The coverage can be invaluable. In fact, nearly one in three women, and about one in four men, can expect to suffer a disability that keeps them out of work for 90 days or longer at some point during their working years, according to the Life and Health Insurance Foundation for Education (LIFE). Again, as was the case with life insurance, your employer’s disability policy may not be enough for your needs, so you may need to consider additional coverage.
  • Retirement plan — Your employer may offer a 401(k) or similar retirement plan, such as a 403(b) plan, if you work for an educational institution or a nonprofit organization, or a 457(b) plan, if you work for a governmental unit. All these plans offer the chance to contribute pretax dollars; so the more you put in, the lower your taxable income. Equally important, your earnings can grow tax deferred, which means your money can accumulate faster than if it were placed in an account on which you paid taxes every year.

  Consequently, try to contribute as much as you can possibly afford to your 401(k) or other employer-sponsored plan. If you’ve gotten a raise recently, consider boosting your contributions during open enrollment. Also, take this opportunity to review the array of investments you’ve chosen for your 401(k) or other plan. If you feel that they’re underperforming and not providing you with the growth opportunities you need, you may want to consider making some changes. You might also think about making adjustments if your portfolio has shown more volatility than the level with which you are comfortable. Your financial professional can help you determine if your investment mix is still suitable for your goals, risk tolerance and time horizon.

  Open enrollment season gives you the perfect opportunity to maximize those benefits offered to you by your employer. So, think carefully about what you’ve got and what improvements you can make — it will be time well spent.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

Lessons from save for retirement week

   Scott-Johnson---HeadCongress has designated the third week in October as National Save for Retirement Week — which means it’s a good time to think about your own retirement savings strategies.
  Ensuring that you have enough money to support your chosen retirement lifestyle is certainly important. Unfortunately, many of your fellow Americans have apparently not done enough in the way of building retirement savings to ease their minds. Consider these figures, taken from the Employee Benefit Research Institute’s 2013 Retirement Confidence Survey:
  • 49% of those surveyed said they are not confident about being able to afford a comfortable retirement.
  • Just 46% of survey respondents say they and/or their spouse have even tried to calculate how much money they will need to live comfortably in retirement.
  What steps can you take to gain confidence in your ability to retire in the manner you have envisioned? Here are a few suggestions:

  • Envision your retirement lifestyle. At what age do you want to retire? When you retire, do you plan to travel or stay close to home and pursue your hobbies? Will you do some part-time work or consulting? It’s important to identify your retirement goals and then, as best as possible, estimate how much they will cost. Once you know what your retirement goals look like, you’ll be able to shape a strategy for achieving them.

  • Contribute as much as you can afford to your retirement accounts. No matter what your retirement goals may be, you’ll help yourself by contributing as much as you can possibly afford to your IRA and your 401(k) or other employer-sponsored retirement plan. (At a minimum, put enough into your 401(k) to earn your employer’s matching contribution, if one is offered.) And if you reach the point where you can “max out” on these plans, look for other tax-advantaged investments to which you can contribute.
  • Invest for growth. To help you reach your goals, you’ll want to include a reasonable percentage of growth-oriented vehicles in your retirement accounts. The exact percentage will depend on your risk tolerance and your specific objectives, but it’s important to have that growth potential. Keep in mind, though, that investing in growth-oriented vehicles involves market risk and possible loss of principal.
  • Review your progress. At least once a year, review your portfolio to determine if its performance is still on track to help you make the progress you need to reach your goals.

  • Make changes as needed. If your investments are simply underperforming, you may need to make some changes. And in the years immediately preceding your retirement, you may also need to adjust your holdings, possibly by moving some dollars from growth-oriented investments to income-producing ones. However, even at this stage of your life, you may still need your portfolio to provide you with some growth potential — you could be retired for two or three decades, so you’ll want your money to last and to stay ahead of inflation.
  National Save for Retirement Week comes just once a year. Take its message to heart.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.

It’s harvest time for your investments

Scott-Johnson---Head  It’s harvest time again. Of course, harvest season may not mean that much to you if you don’t work in agriculture. Nonetheless, you can learn a lot from those who do — especially in your role as an investor.
  Here are a few of these lessons to consider:

  • “Feed” your portfolio. Through the proper combination of fertilizers and irrigation, farmers seek to maximize the growth of their crops. And if you want to give your portfolio the opportunity to grow, you need to “feed” it with the right mix of investments. This generally means you’ll need to own a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based securities. Keep in mind, though, that the value of these types of investments will fluctuate, sometimes sharply — and there’s no guarantee you won’t lose some or all of your principal.
  • Be patient. Crops don’t grow overnight. Farmers know that they will put in countless hours of work before they see the fruits of their labors. And they know that, along the way, they will likely experience setbacks caused by a variety of issues: too much rain, too little rain, insect infestations — the list goes on and on. When you invest, you shouldn’t expect to “get rich quick” — and you can expect to experience obstacles in the form of bear markets, economic downturns, changes in legislation and so forth. Continuing to invest for the long term and focusing more on long-term results than short-term success can help you as you work toward your objectives.
  • Respond to your investment “climate.” Farmers can’t control the weather, but they can respond to it. So, for example, when it’s been dry for a long time, they can boost their irrigation. As an investor, you can’t control the economic “climate,” but you can make adjustments. To illustrate: If all signs point to rising long-term interest rates, which typically have a negative effect on long-term bond prices, you may need to consider reducing your exposure, at least for a while, to these bonds.
  • Diversify. Farmers face a variety of risks, including bad weather and fluctuating prices. They can help combat both threats through diversification. For instance, they can plant some crops that are more drought-resistant than others, so they won’t face complete ruin when the rains don’t fall. As an investor, you should also diversify; if you only owned one type of financial asset, and that asset class took a big hit, you could sustain large losses. But spreading your dollars among an array of investments — such as stocks, bonds, cash and other vehicles — may help reduce the effects of volatility on your portfolio. (Be aware, though, that diversification by itself can’t guarantee a profit or protect against loss.)
  Relatively few of us toil in the fields to make our living. But by understanding the challenges of those who farm the land, we can learn some techniques that may help us to nurture our investments.

Scott Johnson, CFP, is a financial advisor with Edward Jones, 8146 W. 111th St., Palos Hills, 974-1965. Edward Jones does not provide legal advice. This article was written by Edward Jones for use by your local Edward Jones financial advisor.