Investment accounts distributions from pensions and

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investment accounts, distributions from pensions and IRAs (reported on a 1099-R form), and possibly a part-time job. Sometimes, the amount of money that is withdrawn from an IRA in retirement is enough to put a retiree over either the $25,000 threshold or the $34,000 threshold. This should be monitored by either the taxpayer or their financial professional. The maximum amount of SSI benefits that could be taxable is 85%. Married retirees have a higher threshold schedule. The taxability schedule below applies to a married retiree’s Social Security benefits. Is Early Retirement a Good Idea? And now for the $100 million question…should a taxpayer take early retirement? Everyone would love to retire as young as possible and begin to enjoy a different pace of life with perhaps more focus on volunteering and family. But, this is not available for everyone. It is imperative to thoroughly evaluate each early retirement scenario on a case-by-case basis. It may be workable for one taxpayer and not for another. You have already learned that filing for Social Security benefits early will result in a permanently reduced monthly check (PIA). Early benefits result in a reduction in benefits of roughly 7% per year. For every year that a worker decides to keep working past age 62, they are essentially earning a 7% increase in PIA for each year that they keep working. This thought pattern works up to the normal retirement age at which point the increase in benefits is now 8% per year for deferred retirement. This is an interesting way of
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thinking of this scenario. Hopefully, it makes logical sense to you that by not taking a reduced benefit today, the retiree will receive a higher benefit later. This is basically an easy 7% (or 8% in deferred retirement) growth strategy. Sometimes an “early retirement” is the result of an involuntary termination. Business conditions change and layoffs do occur. If a layoff affects someone who is able to qualify for early retirement from Social Security, this might be a tempting option. Some forced retirees in this situation are not planning on remaining in retirement. They are transitional…they are looking for a new job, but they need some money to get them through until the new job is secured. In this instance, the forced retiree has a payback option where they could apply for early retirement benefits. Then, within 1 year, they could repay all benefits received without interest and then benefits would be suspended until they re-apply for benefits at their planned retirement. Their actual retirement benefits will then be based upon when they re-apply for benefits and not on the reduced early retirement amount. This option assumes that the taxpayer has the discretionary cash flow to repay the benefits received.
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  • Spring '14
  • VOSS,JAMESA
  • Cash balance plan

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