Coordinating Retirement Income

3 Feb 2023

Coordinating Retirement Income

Retirement income for Lockheed Martin retirees is a highly important factor to consider when creating a financial plan. When beginning to explore retirement, individuals with a Lockheed pension plan must thoroughly explore their options. To pick just one example, if one elects to receive a monthly payout, is related to the various payout options for survivor benefits. Several examples of payout options include Life Only, 75% Joint and Survivor with a 5-year pop-up, or a Level Income Reduced at Age 65. Deciding between these options requires consideration of multiple factors and assumptions about the future, and this decision should not be made lightly.

For some retirees, an alternative to the various monthly payout options is a lump sum. This selection must also be made at retirement but provides flexibility since the calculated amount can be transferred to a tax-advantaged retirement account. By choosing this route, there is the option for additional growth on the funds versus the steady monthly income of a pension payment. Keep in mind that retirees whose pension payment is over $5000 per month are not allowed to choose a lump sum payout under current Lockheed Martin rules.  Individuals who have the choice to take their pension as a lump sum should carefully consider the advantages and disadvantages of both before making a decision based on individual needs, desires, and life expectancies.

Social Security is a vital part of many retirees’ retirement incomes and having the right plan in place can make all the difference. The decision to claim Social Security benefits in any year between ages 62 and 70 is an essential step in maximizing Social Security benefits. Depending on your personal situation, it may be more beneficial to accrue Social Security’s guaranteed 8% annual adjustment by deferring benefits until after Full Retirement Age.  For others, claiming Social Security at or even before Full Retirement Age might prevent drawing from retirement assets too soon and too quickly. Spousal benefits should also be taken into account when making decisions about Social Security to ensure the most efficient use of this critical aspect of retirement income. No matter which route you choose, it’s important to research and explore all possible options – and there are lots of possible options – so you can develop an optimal Social Security strategy that works best for you.  Advisors at BentOak Capital have extensive knowledge and optimization software that can help you make this decision.

Rolling over a 401k into an Individual Retirement Account can be a useful tool for retirees, allowing them to make the most of their 401k savings. When planning, it’s critical to determine what portion of 401k contributions are pre-tax and what part, if any, is after-tax, and then roll them into the respective retirement accounts. One potential benefit of having retirement funds in an IRA as opposed to a 401k is the opportunity to make Roth conversions. This process involves distributing funds from a pre-tax IRA and depositing the proceeds in an after-tax Roth IRA. This distribution forces income taxes to be paid, but the goal is to pay those taxes at a lower tax rate than might be in force in later years.  One additional benefit courtesy of the recently passed Secure Act 2.0 allows retirees to delay Required Minimum Distributions from their IRAs for a few more years. People born between 1951-1959 must begin taking RMDs at 73. People born after 1960 have RMDs that begin at 75. As 401ks are converted into IRAs and Roth’s later in life, this adjustment allows for a longer period of time to take advantage of bracketing (converting a portion of pre-tax dollars, without jumping into a new tax bracket) based on income tax brackets. Ongoing comprehensive planning, with a focus on tax planning, has the potential of also being a tremendous estate planning tool since Roth IRAs can grow tax-free and be distributed tax-free to future beneficiaries.

Additional items that some Lockheed Martin employees and retirees need to carefully navigate include the salaried savings plan, LMT stock options, employee stock ownership plans, various military benefits, and employee benefits from previous employers. Each of these, in addition to those previously addressed, are all items that we frequently incorporate in a comprehensive plan to optimize how needs are met today and create a roadmap to meet future goals. BentOak Capital advisors would be happy to visit with you about any of these topics at your convenience. We are available on Fridays if that is your preferred day to meet. Call us at 817-550-6750 to discuss further.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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More about the author: Michael Cochran