Ask Terry Questions Tax brackets

Tax brackets

By Terry Savage on July 24, 2017 | Financial Planning / Retirement

My husband has a pension coming from a previous job that he quit 20 years ago to go to work at another job. He's currently 55 years old and is thinking of taking that money out as a lump sum, we understand that they'll be taxes and penalties for taking it early but we need the money now. We estimate after taxes and any penalties he will receive approximately 31,000. He makes around 100,000 at his current job and I'm not working so our yearly income is about 100,000. My question is, will getting this 31,000 count as regular income and move us into a higher tax bracket at tax time? Thank you!

Terry Says

Oh gosh -- I hope I catch you before you make a big mistake.  We all NEED THE MONEY NOW!  But what you're giving up is the future price appreciation, and any inflation adjustments in that pension.  And if it is a true pension, it will be a LIFETIME PAYMENT!  Please think twice about giving up this lifetime monthly check to solve your immediate problems. And to answer your question, yes, this money will be added to your income -- not the net after penalties, but the gross amount you receive!  It will certainly push you into a higher tax bracket!

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