Tweet
I am thinking about retiring next year, and trying to run some numbers. It is not a matter of finances since DH and I are debt-free. The issue is more to do with what I do with myself afterwards -- and whether or not it is financially (as far as taxes) wise. Here is some info:
I work for a local government, and do not pay into Social Security:
Age: 56
Tax Bracket: 33.6%
My current Income: 122K
My Projected Pension Income: 90K
DH and I max our our 401K/457b contributions as well as yearly IRA contributions. Our plans are not eligible for the super dooper backdoor after tax contributions. Used to do Roths but not eligible. We do nondeductible IRAs and convert them afterwards.
Future possibilities:
1. Promotion -- I am on a list (good for 2 years) and placed at the top. However, my boss (who has lots of years) does not look like he is retiring within that timeframe because he has nothing to do. Do I wait as time ticks on? If I wait, my pension will increase. After about 2 years, I would make about the same money staying home. Also, the next time the test is given, I may or may not do as well.
2. Retirement with possible call-back doing the same thing at the same place for a max of 120 days per fiscal year -- this is highly probable. Pay could be as high as 60K (in addition to pension listed above). No ability to contribute to 457b due to initial retirement. Need to check if there are any other avenues to shelter from taxes.
3. Full time employment in the same field for another city -- possible. This would be a full time gig starting at 85K yearly. 457b or equivalent is available as well as a secondary pension if I worked at least 5 years. Job plus --- ability to make a difference. Minus -- coming in as an outside and as a woman. I work in a non-traditional field and my current supervisors do not generally value women. I also do not think that I want to "have" to work somewhere for 5 years.
4. Employment as a consultant with a private company -- probable. I have contacts with many firms but the work would be full-time by project. Pay -- I do not know but am guessing 80K yearly. 401K would be available.
5. Self employed in the same field -- possible as well. Going rates $100hr+ but I think I could open a SEP or Keogh.
6. Self employed in an unrelated field -- I am intrigued with this option. Something online -- perhaps utilizing blogging or etsy. Income -- unknown
Which option would be best from a tax point of view? Would I be working for peanuts for most of those options? For #1 -- there have never been any women in that position, so this is more of an ego thing I guess.
Our DD will be going to college in Fall 2016, but that is already cash flowed. DH thinks I should just retire so I do not have to deal with a bunch of problems. If option #2 comes through, I do not have to work the entire period of time. I would volunteer somewhere locally if that is the case.
Any feedback would be helpful. Please note that I am VERY thankful to have "problems" like this!
I work for a local government, and do not pay into Social Security:
Age: 56
Tax Bracket: 33.6%
My current Income: 122K
My Projected Pension Income: 90K
DH and I max our our 401K/457b contributions as well as yearly IRA contributions. Our plans are not eligible for the super dooper backdoor after tax contributions. Used to do Roths but not eligible. We do nondeductible IRAs and convert them afterwards.
Future possibilities:
1. Promotion -- I am on a list (good for 2 years) and placed at the top. However, my boss (who has lots of years) does not look like he is retiring within that timeframe because he has nothing to do. Do I wait as time ticks on? If I wait, my pension will increase. After about 2 years, I would make about the same money staying home. Also, the next time the test is given, I may or may not do as well.
2. Retirement with possible call-back doing the same thing at the same place for a max of 120 days per fiscal year -- this is highly probable. Pay could be as high as 60K (in addition to pension listed above). No ability to contribute to 457b due to initial retirement. Need to check if there are any other avenues to shelter from taxes.
3. Full time employment in the same field for another city -- possible. This would be a full time gig starting at 85K yearly. 457b or equivalent is available as well as a secondary pension if I worked at least 5 years. Job plus --- ability to make a difference. Minus -- coming in as an outside and as a woman. I work in a non-traditional field and my current supervisors do not generally value women. I also do not think that I want to "have" to work somewhere for 5 years.
4. Employment as a consultant with a private company -- probable. I have contacts with many firms but the work would be full-time by project. Pay -- I do not know but am guessing 80K yearly. 401K would be available.
5. Self employed in the same field -- possible as well. Going rates $100hr+ but I think I could open a SEP or Keogh.
6. Self employed in an unrelated field -- I am intrigued with this option. Something online -- perhaps utilizing blogging or etsy. Income -- unknown
Which option would be best from a tax point of view? Would I be working for peanuts for most of those options? For #1 -- there have never been any women in that position, so this is more of an ego thing I guess.
Our DD will be going to college in Fall 2016, but that is already cash flowed. DH thinks I should just retire so I do not have to deal with a bunch of problems. If option #2 comes through, I do not have to work the entire period of time. I would volunteer somewhere locally if that is the case.
Any feedback would be helpful. Please note that I am VERY thankful to have "problems" like this!
Comment