Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Insurance Settlement Windfall
Old 10-31-2015, 02:44 PM   #1
Thinks s/he gets paid by the post
 
Join Date: Jan 2011
Posts: 1,207
Insurance Settlement Windfall

DW was injured a few years ago and we are about to get small settlement.
She w*rks [school teacher], and will continue to do so another couple of years. In anticipation of my ER a few years back, we moved her entire 403B balance into Vanguard rollover IRA, and she stopped contributions.
So, with the upcoming settlement, I was wondering: should we park that settlement in a liquid account, and start a deductible IRA? We'd use the settlement funds to supplement that deduction for our cashflow.
We'll get the benefit of a short term tax break without seeing any cashflow shortfall. As I see it, it's not a huge difference but it's money in our pocket.
Am I missing anything, or conversely is it not worth the effort?
__________________

__________________
mystang52 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-31-2015, 03:40 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Is she eligible for a IRA deduction? An existing employer retirement plan should kill IRA deductions, even with no balance or contributions. You might be eligible, I suppose. Depends on your tax bracket if the deduction is worth it. The IRA also shelters potential capital gains, as long as your tax rate doesn't go up when withdrawing. Also, the IRA locks it up until the account owner is 59.5, so a taxable account might be better if you will need the money before then. That would be my primary concern about the IRA, if everything else works out.
__________________

__________________
Animorph is offline   Reply With Quote
Old 11-01-2015, 12:19 AM   #3
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,732
Could she restart the employer 403B plan (don't they have employer contributions?).

Is the settlement taxable ? if so can it be put into an IRA directly without taxation?

Otherwise how about ROTH contributions vs regular IRA contributions, so they are tax free upon withdrawal ?
__________________
Sunset is offline   Reply With Quote
Old 11-01-2015, 08:07 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,441
If your current tax rate is substantially higher than you tax rate in ER in the near future then it may be worthwhile to go 403b or tIRA route and save some on taxes.

If not, then I'd look at putting it in a Roth IRA. If you need it you can take out contributions tax and penalty free and if you don't need it you can let it grow tax free.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Credit card FX class action settlement nfs FIRE and Money 2 04-30-2010 11:15 PM
Life settlement twaddle FIRE and Money 19 09-28-2007 12:26 PM
Financial Aid and receiving settlement money artist59 Other topics 2 08-20-2007 03:12 PM
Have nothing - getting settlement money - input welcome dsprik Life after FIRE 38 03-27-2007 06:07 PM
Question on Insurance Settlement Gonzo Other topics 30 01-20-2006 10:41 AM

 

 
All times are GMT -6. The time now is 09:39 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.