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Checklist for last working months?
Old 10-20-2006, 10:14 PM   #1
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Checklist for last working months?

In early 2007 I'll qualify for a small pension and decent health benefits 'til 65. Plus my nest egg with which I'm figuring will call it a last call for working days. I'll be 55 and probably will be on a comfortable but slightly tight budget and modest income. My nest egg will be my primary income source. I think I've done my homework, but am getting those cold feet and am wondering what I might be missing.

A couple of specific things I'm wrestling with is whether it makes sense to up my 401K contributions to get as close as I can get to the upper annual limit with just a few months of paychecks? Last chance to get as much as possible into tax deferred money. Along the same lines, I'm assuming it makes sense to make the full 2007 Roth IRA contribution? I can also work a few extra months without too much consternation, but are there any advantages beyond stashing away a few more paychecks? Does it make sense to decrease my tax withholding from my paychecks starting in 2007 since expect to have less income for the year.

I will wrestle with some tweeks with my asset allocation and whether to flip my 401k into and IRA when there is a little more time to study things. What might I be missing?
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Re: Checklist for last working months?
Old 10-20-2006, 10:21 PM   #2
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Re: Checklist for last working months?

Quote:
Originally Posted by Roger_R
In early 2007 I'll qualify for a small pension and decent health benefits 'til 65. Plus my nest egg with which I'm figuring will call it a last call for working days. I'll be 55 and probably will be on a comfortable but slightly tight budget and modest income. My nest egg will be my primary income source. I think I've done my homework, but am getting those cold feet and am wondering what I might be missing.

A couple of specific things I'm wrestling with is whether it makes sense to up my 401K contributions to get as close as I can get to the upper annual limit with just a few months of paychecks? Last chance to get as much as possible into tax deferred money. Along the same lines, I'm assuming it makes sense to make the full 2007 Roth IRA contribution? I can also work a few extra months without too much consternation, but are there any advantages beyond stashing away a few more paychecks? Does it make sense to decrease my tax withholding from my paychecks starting in 2007 since expect to have less income for the year.

I will wrestle with some tweeks with my asset allocation and whether to flip my 401k into and IRA when there is a little more time to study things. What might I be missing?
I would suggest maximizing 401K & IRA. You can always take out Roth IRA contributions if need be.
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Re: Checklist for last working months?
Old 10-21-2006, 08:35 AM   #3
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Re: Checklist for last working months?

Quote:
Originally Posted by Roger_R
I can also work a few extra months without too much consternation, but are there any advantages beyond stashing away a few more paychecks?
If you get paid for unused sick and annual leave and there is a COLA or raise scheduled, yes. I.E. assume you are paid for unused sick and annual and have a 5% COLA or raise scheduled for July 1st. You might want to work until shortly after July 1st to capture the 5% on your leave payoff check.

Also, if you are close to the end of the year and expect to be in a lower tax bracket when you are retired, you might want to delay until the next year so that any payoff money you receive will be taxed at the lower rate. I.E., let's say you will receive $20K in payoff for sick and annual and are in the 33% bracket now, but will be in the 15% bracket when you are retired, and it is December. By waiting until January to retire, you will collect the $20K in the new tax year and only have to pay 15% tax on that money.

If you get paid for holidays and are close to an upcoming one, you might want to delay retirement until after that holiday to capture a paid day off. I.E., let's say you are planning on retiring the first week of 2008, but MLK Day is coming up. Delay your retirement until the day after MLK Day to capture a "free day."

If your health insurance premiums are paid by your employer, you may want to delay retirement to capture a few more payments. Or, if you cannot get health insurance or the new plan will not cover preexisting conditions once you are retired and you do have a preexisting condition or injury, you might want to get that resolved before retiring. I.E. I had rotator cuff surgery done right before I retired so it would be covered under my employer's health insurance plan. A friend of mine had his knee ACL replaced before he retired.

Quote:
Originally Posted by Roger_R
Does it make sense to decrease my tax withholding from my paychecks starting in 2007 since expect to have less income for the year.
Yes, if you have the discipline to take the money and invest it in something that will give you a rate of return. The IRS does not pay interest on withheld moneys, they just give it back to you when you file your return.
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Re: Checklist for last working months?
Old 10-21-2006, 11:44 AM   #4
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Re: Checklist for last working months?

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Checklist for last working months?
http://early-retirement.org/forums/i...1924#msg131924
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