One more step for man...

[Rich_by_the_Bay]

My replacement at work started yesterday. I am being deliciously ignored (well, OK, it does bring me a twinge of nostalgia), and by the end of the month I will terminate all scheduled duties. I'll stay on the roster for HR purposes til end of October to collect an incentive payout from the 2010 academic year.

So help me out on some details: I anticipate a big drop in income in 2011 but will still stay in a highish (probably 28%) tax bracket that year due to final payouts after Jan. In other words, I think it would be best tax-wise to defer any income to 2012.

1. I have a 403b and 401A which will be rolled over to my IRA after complete termination.

2. My 457 (nongovernment) can be taken as a lump sum any time between about Jan 2011 to 8 years out (age 70.5). I think I will leave it where it is, though I heard that private 457 money is subject to the financial stability of the employer.

3. I have an unused time-off payout which will need to be taken in 2011. Straight income in a high tax year, alas.

4. The institute that I consult for in Las Vegas 5 days a month has made me a part-time employee rather than a 1099 consultant (it's an inducement to stay around, higher benefits, etc). Effective Jan 2 I can participate in their 403b. I am thinking about maxing that out by front-loading my entire paycheck for a couple of months, including a small match. That should help keep earned income lower in 2011.

5. I plan to convert all my qualified money to an equity indexed variable fixed living and death benefit inflation adjusted annuity. ... Just kidding.


Any flaws? Am I missing any angles (financial or otherwise)?

 

[Sarah in SC]

I nearly had a heart attack til I got to the just kidding part!

I like your idea #4 a lot. Not familiar enough with #2 to say for sure.
And hey, congratulations on the big wind-down. Been neat to witness your process of bringing an end to a fruitful and worthy career. One great step for mankind!

 

[Emeritus]

" an incentive payout from the 2010 academic year".

I need more on this !!!

More seriously Why not roll the 457 into the Ira? Why take the risk?

 

[W2R]

Congratulations on being replaced! (Where else but the ER forum would such congratulations be welcome? )

Any flaws? Am I missing any angles (financial or otherwise)?

Otherwise? How about the fact that you mentioned in the past that you much prefer days when you are not working at all, to days when you are working in Nevada?

As I understand it, you have been FI for some time. I think that ER (as opposed to ESR) might be the angle that is missing. But then if you just aren't ready...

 

[REWahoo]

As I understand it, you have been FI for some time. I think that ER (as opposed to ESR) might be the angle that is missing. But then if you just aren't ready...

 

[Rich_by_the_Bay]

More seriously Why not roll the 457 into the Ira? Why take the risk?

There are two types of 457 which are treated differently. Years back I had a public 457 from a state university and I was able to roll that over with no problem. The current private 457 is what is sometimes called a "top hat" plan and I am required to take it no sooner than 60 days after retirment and no later than the year I turn 70.5. Att that time it is treated as ordinary income.

Though I was a full-time academic, my employment was passed through an academic hospital, hence the private designation of my 457.

 

[Rich_by_the_Bay]

How about the fact that you mentioned in the past that you much prefer days when you are not working at all, to days when you are working in Nevada?

I think that ER (as opposed to ESR) might be the angle that is missing. But then if you just aren't ready...

Touché.

If LV stops being fun, I already have the next low-time job lined up.

Get used to it .

 

[CuppaJoe]

Keeping your sense of humor intact is just about everything.

I regret that I was slow to tie up a couple of loose ends, both of which added some closure: 1) making the trip to City Hall to turn in some papers which will remain public record for ten years, and 2) transferring my Keogh to an IRA.

Enjoy it, RichInTampa! I’m imagining you in jeans and a tee shirt at a jazz fest instead of whatever it is people wear to w*rk these days.

 

[bbbamI]

If LV stops being fun, I already have the next low-time job lined up.

Mmmm...that's interesting.

Congratulations to you for doin' it your way....

 

[Alan]

... and by the end of the month I will terminate all scheduled duties.

As I read this line I interpreted "duties" as "patients". I think Doctors should think twice before using words such as terminate.

Congratulations on moving to ESR phase 2.

 

[Rich_by_the_Bay]

As I read this line I interpreted "duties" as "patients". I think Doctors should think twice before using words such as terminate.

Well, it's one way to bring your career to an end.

 

[samclem]

Congratulations on the transition, sounds like all is going well.

I've got no special insight, but just some general ideas.
-- Maybe look into getting the LV company to push some of your compensation into 2012? (possibly delay any reimbursements for travel, etc)
-- Look for opportunities to go the 1099 route, even if it's only a portion of what you make. With a solo401K you could put the first $16,500 in there, plus 25% of whatever you earn (up to a total contribution of $54,500 in 2010, if you are age 50 or older). Plus, there all the other small biz tax deductions--put a big decal on that RV and it becomes a mobile billboard for "Rich_in_Tampa Portable Vasectomy Clinic" and expenses become deductible as advertising (note: check with a very creative and flexible accountant before pursuing this option).

 

[Alan]

Well, it's one way to bring your career to an end.

As the actress said to the proctologist.

 

[Gotadimple]

As I understand it, you have been FI for some time. I think that ER (as opposed to ESR) might be the angle that is missing. But then if you just aren't ready...

Dream On! W2R, it will take Rich a while to get to the ER (no not emergency room) part. Like good wine, good decisions take time!

You just keep going, Rich. Let us know when you're thinking about that second step, someone here will start a pool to predict the exact day!



-- Rita

 

[Rich_by_the_Bay]

Congratulations on the transition, sounds like all is going well.

I've got no special insight, but just some general ideas.
-- Maybe look into getting the LV company to push some of your compensation into 2012? (possibly delay any reimbursements for travel, etc)
-- Look for opportunities to go the 1099 route, even if it's only a portion of what you make. With a solo401K you could put the first $16,500 in there, plus 25% of whatever you earn (up to a total contribution of $54,500 in 2010, if you are age 50 or older). Plus, there all the other small biz tax deductions--put a big decal on that RV and it becomes a mobile billboard for "Rich_in_Tampa Portable Vasectomy Clinic" and expenses become deductible as advertising (note: check with a very creative and flexible accountant before pursuing this option).

Interesting ideas on keeping a 1099 thing going -- esp if I can max out my SS/MC contributions on the salary side. I wonder if you can be both an employee and a consultant for the same company in the same year; then again, why not?

Do you think I can do the vasectomies-R-Us thing despite my severe hand tremors?

 

[travelover]

...................
Do you think I can do the vasectomies-R-Us thing despite my severe hand tremors?

Good point. Better stick to circumcisions.

 

[Rich_by_the_Bay]

Good point. Better stick to circumcisions.

Thanks for the tips.

 

[Alan]

Do you think I can do the vasectomies-R-Us thing despite my severe hand tremors?

Of course you can - you can be a real life "Dr Nick"

 

[Moemg]

Hey ! If you enjoy the part time work go for it . Some of us ( me included ) would be bored stiff without a little job ( mine being ebay ) . Some people like golf,bridge or endless lunches we like getting some fun money for doing something we enjoy .

 

[Martha]

You have a complicated tax situation. As you know the top hat plan can't be rolled over but can only be distributed, either lump sum, in payments if the plan allows, or via an annuity. So your employer only allows a lump sum distribution?

Until the money is distributed it is subject to claims of your employer's creditors. So, that is the risk you take with waiting. Letting it sit delays the date you have to pay tax on the money and because it is deferred comp not only will their be income taxes, you will pay FICA/medicare. So, the balancing act for you is to figure out the best years to take the money, keeping in mind the mandatory minimum distributions after 70.5. I agree that 2011 doesn't sound like the year to take the hit. It may be nice if you can take out the money bit by bit rather than in a lump sum so that is why I asked if there was such a distribution option in your plan. I have no opinion on the annuity option if your plan has one. .

 

[Brat]

I suggest he visit a CPA with a tax practice. He may be changing his state of residence and the Fed tax rates may well go up. So much depends on anticipated earnings, if they are high enough he may max out his SS tax. This is not an easy call.

Oh, it is almost impossible to be both an employee and a consultant at the same time for the same entity, particularly the same tax ID #. Most of the risk is the employer's but who need IRS asking questions...

 

[MichaelB]

Welcome to the world of 1040-ES http://www.irs.gov/pub/irs-pdf/f1040es.pdf

Do you think I can do the vasectomies-R-Us thing despite my severe hand tremors?

Only if you code the additional service properly.

 

[Nords]

Well, it's one way to bring your career to an end.

You've given me a whole new appreciation for the term "survivor bias"...

 

[Rich_by_the_Bay]

You have a complicated tax situation. As you know the top hat plan can't be rolled over but can only be distributed, either lump sum, in payments if the plan allows, or via an annuity. So your employer only allows a lump sum distribution?

Until the money is distributed it is subject to claims of your employer's creditors. So, that is the risk you take with waiting. Letting it sit delays the date you have to pay tax on the money and because it is deferred comp not only will their be income taxes, you will pay FICA/medicare. So, the balancing act for you is to figure out the best years to take the money, keeping in mind the mandatory minimum distributions after 70.5. I agree that 2011 doesn't sound like the year to take the hit. It may be nice if you can take out the money bit by bit rather than in a lump sum so that is why I asked if there was such a distribution option in your plan. I have no opinion on the annuity option if your plan has one. .

Thanks, Martha. The plan only allows a lump sum payout. The FICA/MC information is new to me -- makes me think that taking it in 2011, albeit in a higher tax bracket, may not be so bad because I will have maxed out my FICA/MC tax through my employer and thus not have to pay it (maybe even both sides of it) from my 457 distribution at a later date when I am no longer employed.

I'll definitely run it by my CPA including the self-employment tax issue.

 

[Martha]

Thanks, Martha. The plan only allows a lump sum payout. The FICA/MC information is new to me -- makes me think that taking it in 2011, albeit in a higher tax bracket, may not be so bad because I will have maxed out my FICA/MC tax through my employer and thus not have to pay it (maybe even both sides of it) from my 457 distribution at a later date when I am no longer employed.

I'll definitely run it by my CPA including the self-employment tax issue.

I am going to backtrack and say that I am not sure if FICA is withheld earlier. It is my recollection that FICA isn't due until there is no more risk of forfeiture under the plan. My recollection is old so I may not be correct.

EDIT: Just taking a quick look indicates that substantial risk of forfeiture does not mean that the plan is subject to creditor claims, so there is a chance that those withholding items were paid after the services were rendered. It may depend on the plan. You'll have to check with your tax adviser.