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Healthcare Provider Update: Verizon collaborates with Aetna as its primary healthcare provider, offering a range of health plans and services to its employees and their families. Looking ahead to 2026, the healthcare landscape is poised for significant change, as record hikes in Affordable Care Act (ACA) premiums are anticipated. With some states facing increases exceeding 60%, many individuals could see their out-of-pocket premiums rise by more than 75%, particularly if enhanced federal premium subsidies are not extended. This scenario could create an additional burden for Verizon employees, emphasizing the importance of strategic planning for healthcare coverage amidst such dramatic shifts in costs. Click here to learn more
For Verizon employees nearing Retirement, experts like Michael Corgiat of The Retirement Group can help ensure major financial decisions like using a 401(k) to buy a home are made with a long-term strategy in mind - meeting immediate needs while preserving your wealth over time.
'Brent Wolf of The Retirement Group cautions Verizon retirees against using large Retirement accounts for home purchases and suggests renting or downsizing may provide the flexibility to protect future goals.'
In this article:
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1. Financial impact of 401(k) funds used to buy a home in retirement.
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2. Pros & cons of buying versus renting a home in retirement.
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3. Estate planning and liquidity for Verizon retirees.
And at the threshold of Verizon retirement, the question of how to spend your money to live comfortably becomes more important than ever. One gentleman nearing retirement may move to Georgia. A man with U.S. 350,000 in savings, U.S. 500,000 in a 401(k), and monthly Social Security payments of U.S. 3,000 weighs his options.
He plans to use U.S. 350,000 from savings and U.S. 100,000 from his 401(k) to buy a U.S. 450,000 condominium in Georgia. He also considers pulling another U.S. 20,000 from his 401(k) as an emergency fund. This will keep U.S. 380,000 invested and would yield about U.S. 15,000 a year at a 4% annual withdrawal rate. With Social Security income, this is expected to cover his living expenses, vacations, and major purchases.
The question is whether investing and renting is more profitable than purchasing a property in whole.
Some say the appeal of homeownership stems from avoiding rising rents. But the choice is neither black nor white. If you take a quick look, you pay about U.S. 1,000 a month for taxes and fees to buy the condominium, while renting one would run you about U.S. 2,500.
For estate planning purposes, homeownership is a consideration for Verizon retirees. A report from the National Association of Home Builders for June 2021 said homeownership can boost a person's net worth and homes account for nearly half of the assets of U.S. households over 65. So buying a property might be a place to live as well as a tool for legacy planning and wealth transfer to the next generation.
Verizon employees nearing retirement can get insight from certified financial planners (CFPs). As a Boston CFP, Sandra Gilpatrick estimates that the proposed investment, the condo, would return about 4% on savings. An annual return of 7% would be more likely if the gentleman kept his asset allocation at 60% fixed income and 40% equities. Gilpatrick also discusses unanticipated costs of homeownership. Principal worries are escalating housing association fees, rising property taxes, special assessments, and real estate transaction costs. And using that 401(k) could put the person in a higher tax bracket—potentially triggering the Medicare surcharge, the IRMAA.
Another Kansas CFP, Jamie Bosse, agrees and stresses the tax implications. But that U.S. 120,000 withdrawn from a 401(k) is not the whole amount after tax deductions. At the combined 27% federal and state tax rate, the net is about U.S. 87,600.
Some advisors suggest renting at first when moving to avoid a major financial commitment. By purchasing the condo, the gentleman has also put more than half of his assets at risk, making the gentleman less liquidity-based.
A macroeconomic lens adds additional caution against rash real estate investments. Notably, pre-pandemic home prices have jumped almost 50 percent despite rising mortgage rates in the United States. The housing affordability today is comparable to that of 2007, before the worst real estate downturn since the Great Depression, the Federal Reserve Bank of Atlanta said. There is danger nationwide and locally in Atlanta.
Otherwise, the funds would have stable returns when invested properly. Now, ten-year U.S. Treasury bonds yield 4.3%. Short-term municipal bonds like the iShares Short-Term National Muni Bond pay a 3% yield that is tax-free and low in risk. Such long-term municipal bonds have an effective tax-free yield of 3.4%, while the Schwab U.S. REIT ETF pays 4%.
Financial situations of Verizon employees vary widely. But renting seems prudent now because it gives you liquidity and various investment options.
You could use your 401(k) to buy a home in retirement like a chess master considering an endgame move. As with either case, one must anticipate the consequences of a quick decision down the road. Just as sacrificing a powerful chess piece to temporarily take over the board might risk a checkmate in the future, spending Verizon retirement funds to buy a home might be comfortable now but risky in the long haul. Before making a definitive decision, consider all angles, threats, and the changing environment.
Added Fact:
A study by the American Association of Retired Persons (AARP) for 2023 concluded that aging homeowners are increasingly downsizing their homes during retirement. This unlocks the equity locked up in their larger homes and reduces ongoing housing and maintenance costs. But some Verizon workers approaching retirement find downsizing a smart financial move that frees cash for other retirement goals without tapping into 401(k)s. Such a trend shows how carefully you choose your housing when you reach retirement.
Added Analogy:
You could compare the decision to use your 401(k) to buy a home in retirement to being a ship captain in rough water. As a captain must plot his course to avoid hidden reefs and unpredictable storms, so must Verizon employees approaching retirement plan their financial course as well.
Imagine your 401(k) as a vessel for your life savings. And using it to purchase a house means launching the ship toward some pretty dangerous island. The island provides immediate comfort and shelter but financial waters are unknown and unexpected costs and uncertainties may lurk beneath the surface.
Take instead the advice of a veteran sailor who downsizes their ship to free up resources without risking the whole voyage. Downsizing keeps your financial vessel afloat as you sail into retirement. This lets you sail retirement's seas confidently without compromising long term financial security.
Articles you may find interesting:
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
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- Worst Month of Layoffs In Over a Year!
- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
- 401K, Social Security, Pension – How to Maximize Your Options
- Have You Looked at Your 401(k) Plan Recently?
- 11 Questions You Should Ask Yourself When Planning for Retirement
- Worst Month of Layoffs In Over a Year!
Just as a captain consults his navigational charts, financial experts and the broader economic climate should be considered before making such a big decision. The financial waters ahead may be unpredictable, but with planning you can retire comfortably and safely.
Sources:
1. Cedarhurst Living . 'A Complete Guide to Financial Planning for Senior Living.' Cedarhurst Living , September 2024, www.cedarhurstliving.com/complete-guide-financial-planning-senior-living?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
2. H&R Block . 'Taxes on 401(k) Withdrawal: 401(k) Distribution Rules.' H&R Block , April 2024, www.hrblock.com/tax-center/income/retirement-income/taxes-on-401k-distribution/?srsltid=AfmBOopwY0ozdLNuGStFFyHvJU_Ic2kOaM1OrSWqL-ZAAQy70-IzWk97&utm_source=chatgpt.com . Accessed 27 Feb. 2025.
3. SeniorLiving.org . 'Planning for Housing in Retirement.' SeniorLiving.org , October 2024, www.seniorliving.org/retirement/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
4. Annuity.com . 'The Role of Housing Decisions in Financial Security.' Annuity.com , August 2024, www.annuity.com/estate-planning/the-role-of-housing-decisions-in-financial-security/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
5. Thomson Reuters . '401(k) Tax FAQ: Tax Considerations for Contributions and Withdrawals.' Thomson Reuters Tax & Accounting , June 2024, www.tax.thomsonreuters.com/blog/401k-tax-faq-tax-considerations-for-contributions-and-withdrawals/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
How does the Verizon Pension Plan facilitate retirement income for long-term employees, and what specific benefits can employees expect when enrolling in the retirement program provided by Verizon? What unique features does the Verizon Pension Plan offer compared to other retirement plans an employee might have encountered, and how can employees maximize the benefits of these features throughout their career at Verizon?
Verizon Pension Plan Benefits: Verizon's Pension Plan offers substantial benefits aimed at facilitating a secure retirement for long-term employees. Upon enrolling in the retirement program, employees can expect defined benefits that are based on their salary and years of service, ensuring a predictable and stable income after retirement. Unique to Verizon, compared to some other plans, may include options for early retirement under certain conditions and a choice between annuity payments or a lump-sum distribution upon retirement. Employees can maximize these features by planning for long-term service and considering their retirement income needs early in their careers.
In what ways can employees at Verizon strategize their rollover decisions when transitioning from the Verizon Pension Plan to other retirement savings plans upon leaving the company? What factors should be considered by Verizon employees to ensure they are making informed choices regarding rolling over funds to a traditional IRA or another qualified employer plan?
Rollover Strategies: When transitioning from the Verizon Pension Plan to other retirement savings options upon leaving the company, employees should strategize their rollover decisions carefully. Factors to consider include the tax implications, the investment options available in the rollover destination, and the timing of the transfer to avoid penalties. Verizon employees should evaluate the benefits of rolling over to a traditional IRA or another employer's plan, considering their future financial needs and retirement goals.
What are the implications of the recent IRS limits for 2024 concerning contributions to retirement plans for Verizon employees, and how does Verizon align its offerings with these federal regulations? Additionally, how can Verizon employees best take advantage of these limits to enhance their retirement savings while adhering to tax regulations?
IRS Contribution Limits: The implications of IRS limits for 2024 are critical for Verizon employees as these limits dictate how much can be contributed tax-deferred into retirement plans. Verizon aligns its offerings with these federal regulations by adjusting contribution limits in their plans accordingly. Employees are encouraged to maximize their contributions to take full advantage of tax-deferred growth, especially when IRS limits increase, thereby enhancing their retirement savings while adhering to tax regulations.
How does the special tax treatment for lump sum distributions from the Verizon Pension Plan affect employees who receive their benefits early or have specific circumstances, such as being born before 1936? What options do these employees have to manage their tax burden effectively, and how can they best navigate these complicated rules while planning for their retirement?
Tax Treatment of Lump Sum Distributions: The special tax treatment for lump sum distributions from the Verizon Pension Plan can significantly affect employees who opt to receive their benefits early or under specific circumstances like being born before 1936. These employees have options to manage their tax burden effectively by opting for ten-year averaging or capital gain treatment on eligible distributions, allowing for a potentially lower tax rate on their pension benefits.
For surviving spouses and alternate payees of Verizon employees, what are the specific benefits available under the Verizon Pension Plan? How do these benefits compare to those available to employees, and what steps must surviving spouses or alternate payees take to ensure they receive their entitled benefits without delays or complications?
Benefits for Surviving Spouses and Alternate Payees: For surviving spouses and alternate payees, the Verizon Pension Plan offers benefits similar to those available to employees, such as annuity payments or lump-sum options. These beneficiaries must take certain steps to ensure they receive their benefits without delays, such as providing necessary documentation and adhering to plan rules. The plan details and processes for claiming benefits should be clearly understood to avoid complications.
How can Verizon employees utilize the resources available through the Verizon Benefits Center to better understand and manage their retirement benefits? What specific tools and services does the Benefits Center provide, and how can these resources assist employees in making informed decisions regarding their pension plan options?
Utilizing Resources at the Verizon Benefits Center: Verizon employees can utilize various tools and services provided by the Verizon Benefits Center to manage and understand their retirement benefits. The Benefits Center offers personalized consultations, detailed plan documentation, and tools for estimating pension benefits and planning retirement income, assisting employees in making informed decisions about their pension plan options.
What challenges might Verizon employees face regarding eligibility and tax withholding when receiving their pension payments, and how can they mitigate these issues? It's crucial for employees to understand the mechanics of eligibility regarding rollovers and payment processing; what key pieces of information should they be aware of to avoid unexpected taxes?
Challenges in Eligibility and Tax Withholding: Verizon employees might face challenges regarding eligibility and tax withholding when receiving pension payments. Understanding the plan's criteria for eligibility, the implications of rollovers, and the impact of mandatory withholding on distributions is crucial. Employees can mitigate these issues by consulting with the Verizon Benefits Center or a tax advisor to ensure compliance and avoid unexpected taxes.
What is the process for Verizon employees wishing to initiate a direct rollover from the Verizon Pension Plan, and what documentation will they need to prepare? Can employees receive assistance from the Verizon Benefits Center during this process, and how does using a direct rollover benefit them compared to other forms of payment?
Direct Rollover Process: The process for initiating a direct rollover involves deciding the destination of the rollover (traditional IRA or another employer plan), completing necessary documentation, and potentially seeking assistance from the Verizon Benefits Center. A direct rollover helps in avoiding immediate taxes and maintaining the tax-deferred status of retirement savings.
In terms of retirement preparedness, how does the pension plan at Verizon accommodate employees’ needs for financial security in their senior years? What additional education or resources does Verizon provide to assure that employees fully understand their retirement options and the importance of planning ahead?
Retirement Preparedness: Verizon's pension plan is designed to accommodate the financial security needs of employees in their senior years. In addition to the pension benefits, Verizon provides educational resources and planning tools to ensure employees understand their retirement options and the importance of early and consistent retirement planning.
How can employees reach out to the Verizon Benefits Center for further information about the pension plan and other retirement benefits? What specific contact methods are available to employees, and how can these interactions enhance their understanding and management of retirement benefits provided by Verizon?
Contacting the Verizon Benefits Center: Verizon employees seeking more information about their pension plan and other retirement benefits can reach out to the Verizon Benefits Center through various contact methods such as phone, email, or online portals. These interactions are crucial for enhancing understanding and effective management of retirement benefits, ensuring employees make the most of the benefits available to them.
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