BigNick
Thinks s/he gets paid by the post
A friend (here in Europe) has applied for, and thinks he will get offered, a good job at a U.S. university. Whether or not he takes it will depend in large part on pension considerations, as he has a spotty pension record due to frequent job changes earlier in his career.
He is 50 and intends, for the purposes of this calculation, to work until he's 68. I'm going to assume he will get a salary of $117,000, which I believe is approximately the Social Security "wage base". The SS calculator gives me a figure of $2,226/month.
The university will contribute 10% of his salary (up to the SS wage base; 15% thereafter) into a 401(a) plan. No employee contribution required. (There is a 403(b) available for extra employee contributions.) With 5% CAGR and 1.5% inflation, I calculate that he will have accumulated $367,000 gross (worth $285,000 in today's dollars).
My question is, what happens to that 401(a) money at age 68? Does he have to buy an annuity, or can he draw it down as he likes? If the latter, what is the tax situation? If he takes the whole sum (for example, to move it back to Europe), will he have to pay income tax that year on all $367,000?
Thanks for any help - I presume this is fairly basic!
He is 50 and intends, for the purposes of this calculation, to work until he's 68. I'm going to assume he will get a salary of $117,000, which I believe is approximately the Social Security "wage base". The SS calculator gives me a figure of $2,226/month.
The university will contribute 10% of his salary (up to the SS wage base; 15% thereafter) into a 401(a) plan. No employee contribution required. (There is a 403(b) available for extra employee contributions.) With 5% CAGR and 1.5% inflation, I calculate that he will have accumulated $367,000 gross (worth $285,000 in today's dollars).
My question is, what happens to that 401(a) money at age 68? Does he have to buy an annuity, or can he draw it down as he likes? If the latter, what is the tax situation? If he takes the whole sum (for example, to move it back to Europe), will he have to pay income tax that year on all $367,000?
Thanks for any help - I presume this is fairly basic!