Author Topic: receiving pension check whats a good tax optimization stratergy!?  (Read 522 times)

ejmyrow

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Aloha Amazing Mustachians!
I am saving 48% of my income. I have a 403b, and 457, and a pension. The pension is mandatory at 7%. At 5 years the pension money becomes a guaranteed annuity (that you can start taking as early as 55). Before 5 years it's just a check. I want to get preggers, give birth, and quit my job before the 5 year mark, and not work for that year after the birth, is there any way I will be able to allocate  my pension money without it being taxed? I'm assuming it would be taxed at 10% because of the bracket that goes up to $9,525. We are planning for me to receive my pension check in a year that I have no other income, and my pension check will likely be less than $20,000.

Tax Optimization strategy! How can I minimize the taxes on this pension? Could I roll it over to a certain type of account? Could I roll over half of it to a tax deffered account?

Or, is there another way we could be going about our finances?!

My husband is also saving (somewhat less) in his retirement accnts and he may continue to work while I care for the baby.
So this is the other factor, we are married. I have a large student loan on an income-based payment plan. He has none. We are assuming we will file separately. Any reason not to?

Thanks so much for any advice!
E2
« Last Edit: October 06, 2018, 12:19:42 PM by ejmyrow »

MDM

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Re: receiving pension check whats a good tax optimization stratergy!?
« Reply #1 on: October 06, 2018, 01:22:27 PM »
Tax Optimization strategy! How can I minimize the taxes on this pension? Could I roll it over to a certain type of account? Could I roll over half of it to a tax deffered account?
The answer to the first question depends on the answer to the last.

If you have been making tax-deferred payments to the pension, it is likely you will be able to roll a lump sum payment into an IRA, thus paying no taxes at all for that transactions.  Check your benefits.

As far as MFJ vs. MFS goes, you'll have to run the numbers for your specific situation.  Will you have to pay tax on any lump sum forgiven amount?  If so, it may be better to pay it all on a regular basis.  Again, it depends on your specific situation.

TomTX

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Re: receiving pension check whats a good tax optimization stratergy!?
« Reply #2 on: October 06, 2018, 07:55:41 PM »
Are you forced to take the pension out, or can you leave it in place and at some point go back and work another year?