Go Curry Cracker > Early Retirement

Salary Deferral Distribution

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SamChav:
I quit my job back in Apr, 2022 to Coast FIRE in 8 years. 

Now on a Freelance contract till Jun, 2023 and expected to make 80K in 2023.

My salary deferral plan (457) from ex employer begins distribution in Feb, 2023.  I have an option to spread it across 5, 10, 15 years.
Current balance is 400k and interest is accrued during the distribution phase averaging between 6-7% per year.
 
For 2023, if we spread the 457 distribution across 10 or 15 years we remain in 22% Marginal bracket, if 5 years it will be 24%. Not sure after 2023, depends on my gig income. We can meet our expenses with my spouse's reatively stable income + any of 5, 10 year (not 15 yr) distribution.

Question: Not able to decide to go with 5,10 or 15 years distribution? Any thoughts very much appreciated.

Thanks for your help!
Sam

gocurrycracker:
Generally speaking.... tax deferral over 10 years +/- isn't worth a ton and it is hard to get excited about saving 2% on taxes. (400k * 2% = $8k.)

I could ask some followup questions if you disagree.

SamChav:
Happy New Year!

Thanks for your response. I agree.
Between 5 yrs(22% marginal TB)  and 10 yrs (24% marginal TB) distribution options which one would be better? It's financially stable company, pays out a min of 6% and averaged 7% in the last 20 years.  So which is better, take 5 years distrib. and invest in index funds or 10 years with a min 6% rate of return...in the wake of the current economic and stock market down turn?

gocurrycracker:
I'd just take it all out as fast as possible then

Pros:
Market is low(er)
All future gains are tax-deferred or zero tax (never sell, leave to charity or heirs)
More years with flexible income to optimize ACA premiums (if applicable)

SamChav:
Thank you for your insights and help!

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