Deferred Income Tax Question

[BadgerNCarolina]

So - I have a tax deferred 409a account with approximately $450k accumulated over the past 6 years. My plan was to get to 10 years with my company, at which point I have the option to have that paid over the first 10 years of my retirement. I expected to have ~$1.5M in there and still could if things progress ideally.

However, there is a very real possibility of a reduction for me, and possibly even an offer for early retirement that I may consider. If that happens, the deferred account gets paid out immediately, and in addition I expect that my severance would be anywhere from $400k - $600k depending on time of year. So - there's a possibility that I could be receiving something around $1M in compensation next year (as of now it appears that I will make it through 2024 with a j*b, which is very helpful as I would have had to add in the income I've already made if done late in the year).

So - the question is, has anyone had experience dealing with this type of 'issue' from a tax perspective, and if so do you have any tax-limiting techniques? To be clear, we are in the middle of finally completing our estate plan, and will ask our attorney (as she's also a tax attorney), but thought I'd open it up to the really smart people on this forum first! Thanks

 

[Closet_Gamer]

I have a NQDC plan and those things are pretty much set in stone that they have to adhere to the plans documents. Best I can suggest is working with the company try and do the severance in one year and the NQDC payout in the next.

If you inclined to do big charity donations, good to load them all into the year when everything will be in the top tax bracket. We use a donor advised charity trust with Schwab. Allows us to do big donations to the trust in one year and then space the charity outlays over time. Has worked very well.

 

[BadgerNCarolina]

I have a NQDC plan and those things are pretty much set in stone that they have to adhere to the plans documents. Best I can suggest is working with the company try and do the severance in one year and the NQDC payout in the next.

If you inclined to do big charity donations, good to load them all into the year when everything will be in the top tax bracket. We use a donor advised charity trust with Schwab. Allows us to do big donations to the trust in one year and then space the charity outlays over time. Has worked very well.

Thanks - good advice!