June 13, 2019

Mailbag: Retention Bonus or Retirement?

12 minutes

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.

Check out this episode's show notes: https://petersonfg.com/mailbag-retention-bonus-or-retirement

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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.

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By Eric Peterson

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