Mailbag: Retention Bonus or Retirement?

Today’s Prep:

As you near the final months or years before taking the plunge into retirement, there are always a few details to work out and questions to ask. Eric answers a few questions from the mailbag about pensions, paying taxes in retirement, and deciding when to walk away from a retention bonus and just retire already.

(Click the featured times below to jump forward in the episode)

Equipping Points:

[0:48] Pensions: Lump sum or payout?

  • You need to look at what the payout of the pension is.
  • How many years will it take you to break even on the payout?
  • Eric talks about clients locally who had the option for the pension payout.
  • Having a guaranteed payoff is comforting, but you don’t have the control of it if something happened to you early.
  • How many months will it take to get the lump sum back?

[4:28] Mailbag: Taxes in retirement

  • Kathy in Clive says her income will be very different once she retires. What should she do about taxes?
  • First, pay your taxes.
  • Right now, your taxes are automatically withheld at your job. In retirement, you can choose if you want your taxes withheld or not.
  • If you have a pension or Social Security or even IRA distributions, you can choose to have it withheld automatically. Or, you can get the full check and send in the quarterly estimated taxes.
  • In retirement you have more tax control than you’ve had in the past.

[7:46] Retention bonus or retiring?

  • James in Grimes has been frustrated and stressed with his job, but he receives a sizable retention bonus along with stock options each year. When can he walk away without feeling bad about it?
  • The job probably provides this bonus because they know it is grinding.
  • If you went through a planning process, you could determine whether or not you could retire today.
  • If you know you can retire, it may make going to work more palatable or give you the feeling of control.
  • Life’s too short to work somewhere that you don’t like.
  • Sometimes if you modify your lifestyle or take a part-time job you can retire and do what you want to do.

Today’s Takeaway:

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

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