![]() Workers who have given serious time and thought to what they will do after they retire will generally experience a smoother transition than those who haven't. Life planning is an important key to a successful retirement. These folks opted to postpone their retirement by months or years. Not surprisingly to me, more than a few clients, when asked these questions, realized that even though they might have been financially ready, they had not thought through some important non-financial aspects of creating their happy retirement. A few of the questions I ask to help clients explore their post-retirement identity are: How do you plan to spend your time? What are your hobbies? What activities will fill your days? Are people in your social circle already retired? It’s true that your FERS pension begins the first day of the month after you retire, BUT that doesn’t mean you’ll immediately start receiving payments that fast!īe prepared to wait because OPM’s retirement application processing time can vary quite a bit.Helping clients answer real post-retirement planning "lifestyle" questions ends up being an important aspect of full retirement financial planning. Mistake No 4: Thinking that FERS starts Right Away The Moral of the Story: If you’re retiring under age 59 ½, you should strongly consider leaving your funds at TSP because of the early age withdrawal wavier. BOOM! Once she transfers her TSP to an IRA, she’s lost the waiver, and any withdrawals under age 59 ½ may be subject to early age withdrawal penalties (until she reaches 59 ½). She’s decided to transfer her TSP to an IRA right away, but she doesn’t know about the early-age withdrawal waiver inside of TSP. Don’t be in such a hurryīut here’s a mistake that some people make. If you retire or separate from service in the year in which you turn 55 years or older, you can take withdrawals from TSP without any early age penalty! It’s called a waiver. This can get expensive.īUT there’s an exception for your TSP. If you’re younger than that, you could have to pay something called an early age withdrawal penalty, plus normal income taxes. Normally, you must be at least 59 ½ year old to take monies out of your retirement savings account (like TSP or IRA). But they aren’t too clear about age restrictions before they pick their retirement date. Tax planning and retirement go hand-in-hand! (Unless you like tax surprises, which most of us prefer to avoid like the plague.) Mistake No 3: Losing TSP Monies to PenaltiesĪ lot of people plan to use money from their TSP when they retire. Ask if it might be better to pick a retirement date on the last day of the year or within the first few months of the year when your work earnings will be less so that your Annual Leave payment may be taxed at a lower rate. “What happened last year? Why didn’t you call me?” He could have to unexpectedly pay more income taxes the following April. Now, Sam gets this big Annual Leave payment and it puts him into a higher tax bracket. Let’s just pretend that Sam Sample retired on October 31 st, and he’s earned most of his regular income having worked for most of the year. If you have a lot of Annual Leave saved up when you retire, you’re likely to get a pretty big check-BUT IT’S TAXABLE! This income is going to be added to all your other earnings that year. Mistake No 2: Paying More Income Taxes Unexpectedly Check OPM’s Leave Ending Dates so that you can avoid this potentially costly mistake. Here’s the challenge: The Leave Ending Date changes every year, so this can be tricky.
0 Comments
Leave a Reply. |