In general tax planning for retirement is fairly easy. There are two significant tax savings in retirement verses full-time work. They are:
1. No Social Security or Medicare tax taken out of retirement income.
2. Lower tax brackets. See Tables
As a result of this and other savings a person can generally retire on as little as 50% of their gross hourly pay from working at Verizon. In other words, under the right conditions retirement may be within reach even when the figures suggest otherwise.
Retirement does take money, a steady replacement for your current paycheck. Many people don’t know how to use the tax code to their advantage. If you are under age 59 _ a little known tax break will play a big role in your retirement plan; 72(t). It allows you to draw on your pension lump sum and 401(k) at any age without penalty. The overall rules are simple, but the strategy to use the rules with the best results are complex. To see approximately how much you can draw under 72t please click here. We keep this site updated with the permitted assumptions regarding interest rates so you just need to plug in your age and the amount of your 401k and lump sum added together.
Believe it or not the IRS has a fantastic website that’s easy to use. If you need forms or instructions or you have a question, go to www.irs.gov and type in your search at the left. There is a second dialogue box to select if you want to get forms.