My employer has decided to end our traditional Pension Plan and will cash me out with a Lump sum payment. Would it be wise to pay off as many as possible of my rental property mortgages? I am 55 and not sure if this is the end my present employers existence. Thanks in advance for your advice.
Hi,
You have not provided anywhere near enough information to make advice on your financial future! Find a financial planner in your area and make an appointment, this expert should be able to create a plan based on your specific financial needs!
GR
Real estate is no better than any other investment except for leverage. Leverage allows you to control more real estate than you could using all cash. If you are not going to use debt in real estate you can do just as well buying laundromats or pizza stores all cash. I would take the money my employer is going to give me and use it for downpayments on as many more additional properties as I can instead of paying off the existing ones.
I am not an experienced investor/realtor but this is my take on this. I think, if I were in your shoes, I’d pay off the balance. I’ll rent out my property so I’d still get an income. If there’s still some cash left, I’d use it for the down payment of another property. This way, there isn’t any risk of foreclosure whatsoever as the 1st property is already paid, the profits from it is used to pay for the next property I’m investing and there’s no fear if whatnot. I am a risk taker but I don’t wanna keep on investing and investing while i am still on debt or not yet finished paying off my first investment. Good luck!
Beckworth,
If the money is in a pension, you need to understand the tax implications if you take the money now. You might not be entitled to do so with a penalty.
I do not agree with the early reply that says real estate investing is no different other than leverage. Be careful when you get really simple advice for what is a technically a complex topic.
If the pension is being closed, what entity is acting as the pension trustee. Ask them as they have some responsibility to the people in the pension. It will likely be someone beyond just the employer.
Speak with a tax attorney to understand the legal issues and how best to organize your estate before you touch the funds.
This is good advice. Before rushing to spend the money, you need to create a financial plan to make sure that it will work for you. It may be very difficult to find a well paying job at 55. This pension payoff needs to be used in a way that can supplement if not sustain your cost of living. A financial planner will be best able to advise you about that.
If you would like to avoid tax penalties (or just tax in general), you could roll the amount into another account. A single-premium deferred annuity would mimic your pension, in that you would receive payments when you retire. I would never tell someone to invest in the stock market, however.
Or you could roll the money into a self-directed IRA or even a ROTH IRA and use the IRA $$ to purchase real estate in the name of the IRA.
What he said!