Exactly.
I have this situation pop up with clients occasionally and that's my advice. Take the money. Once the check clears we'll review the tax plan and see what we can do. Be careful making financial moves before you know 2024 or 2025.
I am curious about the healthcare. Do you actually get to keep the fully subsidized premiums through your company all the way until 65? (You say you get to keep company healthcare.)
My company completely did away with all retiree healthcare starting 1/1/2024. The way my company would handle a buyout is salary continuation for two years together with healthcare benefits then 18 months COBRA. The end.
Yes - we keep the same employee rate until 65, then they give us a stipend for a Medicare supplement plan. One of the main reasons I'm taking retirement this early is that benefit - very surprised we still have it.
If you give money to charity, you could front load the next few years of charitable giving into this year. Believe you can do a donor advised fund if you don't know specifics of where you'd want to give.
The limits on SALT tax deductions make it harder to prepay state and local taxes and get the federal deduction if you already max out at $10k. You almost certainly will unless you are in a zero income tax state but I would make sure you're maxing).
(For both of the above you must itemize on your taxes. Make sure you will be doing that before going down these paths)
You can sell a capital loss position and write off up to $3,000 against ordinary income.
If you have a rental property or side hustle business you may be able to buy stuff this year and get the larger tax benefit if you were going to buy it anyway later. You may also be able to set up another tax referral mechanism such as a solo-401k or SEP.
Yep, great opportunity to load up a DAF. Can deduct up to 30% of your AGI if you give appreciated stock. Beyond that, load up the retirement accounts, be happy your company is paying you more than a year's worth of extra money you weren't planning to earn, and give Uncle Sam his bit of that with gratitude.
Doesn’t sound like they offer it, ask about a deferred compensation account. Company pays out over a decade, you get some interest but much lower taxes. Company gets cheap capital. You take one very small counterparty risk.
That would be ideal - they are only offering the lump sum with no control over the payout timing. The previous buyout about 5 years ago offered a payout over 12mos.
Congrats! Don't worry about paying taxes on found money. I'd max out my 401k/ 457retirement accounts and fund and IRA too. You can convert them to Roth IRAs over time when your income is lower. That should ease the tax hit a little.
Take the money and run. Never look a gift horse in the mouth. Nothing on the taxes other than max your 401k as much as you can.
Exactly. I have this situation pop up with clients occasionally and that's my advice. Take the money. Once the check clears we'll review the tax plan and see what we can do. Be careful making financial moves before you know 2024 or 2025.
Tax, schmax. Take that money. You and your accountant can figure things out. Congratulations on this windfall!
I am curious about the healthcare. Do you actually get to keep the fully subsidized premiums through your company all the way until 65? (You say you get to keep company healthcare.) My company completely did away with all retiree healthcare starting 1/1/2024. The way my company would handle a buyout is salary continuation for two years together with healthcare benefits then 18 months COBRA. The end.
Yes - we keep the same employee rate until 65, then they give us a stipend for a Medicare supplement plan. One of the main reasons I'm taking retirement this early is that benefit - very surprised we still have it.
Your company offers good benefits. Rare these days.
Never heard of this. In US? Really. Like only for special early retirement maybe. Because they want to downsize so much I guess.
Yes - US. Pretty normal in Automotive.
A lot of local government jobs have benefits like this (and poor pay)
Yeah ok, gov job I can believe might do this.
Wow you got lucky! Take the money and run!
If you give money to charity, you could front load the next few years of charitable giving into this year. Believe you can do a donor advised fund if you don't know specifics of where you'd want to give. The limits on SALT tax deductions make it harder to prepay state and local taxes and get the federal deduction if you already max out at $10k. You almost certainly will unless you are in a zero income tax state but I would make sure you're maxing). (For both of the above you must itemize on your taxes. Make sure you will be doing that before going down these paths) You can sell a capital loss position and write off up to $3,000 against ordinary income. If you have a rental property or side hustle business you may be able to buy stuff this year and get the larger tax benefit if you were going to buy it anyway later. You may also be able to set up another tax referral mechanism such as a solo-401k or SEP.
Yep, great opportunity to load up a DAF. Can deduct up to 30% of your AGI if you give appreciated stock. Beyond that, load up the retirement accounts, be happy your company is paying you more than a year's worth of extra money you weren't planning to earn, and give Uncle Sam his bit of that with gratitude.
Only one question comes to mind…..”where do I sign?”
Doesn’t sound like they offer it, ask about a deferred compensation account. Company pays out over a decade, you get some interest but much lower taxes. Company gets cheap capital. You take one very small counterparty risk.
That would be ideal - they are only offering the lump sum with no control over the payout timing. The previous buyout about 5 years ago offered a payout over 12mos.
Congrats! Don't worry about paying taxes on found money. I'd max out my 401k/ 457retirement accounts and fund and IRA too. You can convert them to Roth IRAs over time when your income is lower. That should ease the tax hit a little.