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Hi from Crystal Lake and I am working on my retirement
Old 05-12-2011, 07:33 AM   #1
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Join Date: May 2011
Location: Crystal Lake
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Hi from Crystal Lake and I am working on my retirement

My kids are grown and we are currently renting in the Chicago Area.

I own property in our retirement state, Mississippi and plan to build a home there after I retire at 55. I am already retired form the US Navy and plan to take my pension from my current employer as a Lump Sum Disbursement (LSD). It is a small amount but will cover all of my homebuilding expenses with a little left over for maintenance. I plan to go right to work consulting making about the same as I do today, $130K to $150K while working part time with a portion of that from home. I will have to travel a lot more but it is just one of the things I have decided is a worthwhile sacrifice to be near the family and my kids again.

Looking to find out what type of tax implications there are in a LSD after 55 and is any of it mitigated by building/buying a home with the proceeds. Also, is there anyway to tap into my 401K at the same time.

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Old 05-12-2011, 11:56 AM   #2
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Join Date: Jul 2009
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DH retired last year and took his pension as a lump sum. We are planning on soon building a house and considered paying cash. However, taking the money out is, of course, taxable and would throw us into a very high tax bracket. Basically, we would pay about half the price of the house for the taxes. That is, if the house being built was $250k the taxes would about $125k!

At this point, we are probably going to get a construction loan and then a mortgage with the plan to pay it off over a few years but withdrawing over a period of years so we don't get thrown into a high tax bracket.

All of that said, I did use Firecalc to see what would happen if we paid cash for the house even though doing so when you factor in taxes would reduce our money by about 30%. Firecalc says we would still be fine doing it but I'm still reluctant. We still haven't totally decided which way to go.
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