PG&E employees: IRA Rollovers

Healthcare Provider Update: Healthcare Provider for Pacific Gas & Electric The primary healthcare provider for employees of Pacific Gas and Electric (PG&E) is often covered under large insurance carriers that offer comprehensive plans, including offerings from Blue Cross Blue Shield and UnitedHealthcare; the exact provider may vary depending on the employee's specific plan and regional options available. Projected Healthcare Cost Increases in 2026 As we look ahead to 2026, healthcare costs are anticipated to rise significantly due to a combination of factors. Insurers are reporting average premium increases that could exceed 20%, driven largely by ongoing inflation in healthcare services and the potential expiration of enhanced subsidies provided under the Affordable Care Act. This perfect storm of rising medical costs and diminished financial support could shock many consumers, with estimates suggesting that out-of-pocket premiums might surge by as much as 75% for individuals reliant on marketplace plans. As such, both employees and employers within PG&E should prepare for heightened expenses, taking proactive steps now to mitigate potential financial impacts. Click here to learn more

IRA ROLLOVERS FOR LUMP SUM PENSION PAYOUTS

Give those dollars the opportunity for further tax-deferred growth.

A big payout leads to a big question.  If you are taking a lump sum pension payout from PG&E (If offered by your company), what is the next step for that money? It will be integral to your retirement; how can you make it work harder for you?

Rolling it over might be the right thing to do.  If you don’t have substantial retirement savings, your PG&E lump sum option (If offered by your company) may be just what you need. The key is to plan to keep it growing.That money shouldn’t just sit there.

Even tame inflation whittles away at the value of money over time. Most corporate pension payments aren’t inflation-indexed, so those monthly payments eventually purchase less and less. Lump sums are just as susceptible: if you receive $100,000 today, that $100,000 will buy 50% less by 2028 assuming consistent 3% inflation (and that is quite an optimistic assumption). 

Putting it in the bank might cause you some financial pain.  If you take your PG&E lump sum payout (If offered by your company) and deposit it, all that money will be considered taxable income by the IRS. (There are very few exceptions to that rule.) Moreover, you won’t get the whole amount that way: per IRS regulations, your employer must withhold 20% of it.

Don’t you want to postpone paying taxes on those assets?  If you transfer the lump-sum distribution into a traditional IRA, you can postpone paying taxes on those funds. It's possible to delay paying taxes on a distribution that has already been paid to you by rolling over the taxable portion to an IRA within 60 days of receiving the payment.

In doing so, you are keeping those assets in a tax-deferred account. They can be invested as you like, and that money will not be taxed until it is withdrawn. (You may only transfer a lump sum distribution from a company pension plan into a traditional IRA – you may not transfer it to a Roth IRA.)

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If you are considering taking a lump sum payout, make sure you position that money for additional tax-deferred growth. Talk to a financial professional who can help you with the paperwork and get your IRA rollover going.

Citations.

1 - money.cnn.com/2012/09/01/pf/expert/pension-payments.moneymag/index.html [9/1/12]

2 - www.kiplinger.com/article/retirement/T037-C000-S002-pensions-take-a-lump-sum-or-not.html [9/11]

3 - www.irs.gov/taxtopics/tc412.html [1/4/13]

4 - www.fool.com/retirement/manageretirement/manageretirement2.htm [1/21/13]