pension benifit

I have aquestion about our pension benifits. If an officer retires after 25 years (20 years plus 5 years in the drop) and is under the age of 59 does he/she still get the option for the monthly benifit or is the officer forced to take the lump sum and get raped in taxes? Maybe some one that knows the answer or is on the pension board can respond. Thanks

If you take the lump sum and don't roll it into a tax qualified plan, you pay taxes as income for that year, which puts you in the highest tax bracket for most of the money. In addition, if you are under 59 you pay a 10% penalty. It is better to take the monthly benefit and avoid the 10% penalty and also avoid the huge tax hit from the top tax bracket.

P.S. Don't bother asking your pension board members technical questions like this. You elected them because they are popular, not because they are smart.

My error...after further research, the age is 50 for public safety employees (see IRS Publication 575). You still pay tax at the high bracket, but after 50 there is no 10% penalty.

P.S. Don't bother asking your pension board members technical questions like this. You elected them because they are popular, not because they are smart.
Im sure you could do a better job... you've always have looked out for whats best for you

Another thing you should take into consideration is Deferred Compensation. (Hopefully you have an account). If you (Police & Firefighters) retire under 59 ½, you can access your Deferred Compensation money without incurring the 10% tax penalty that comes with accessing other “qualified money”. You are taxed on that money as normal income. I also suggest opening a ROTH IRA (if you qualify)…all your gains are tax free.

As far as your pension "Lump Sum" goes. You can roll that into another “qualified” account (i.e. IRA or Annuity)…If you are under age 59 1/2 and retired, you can get access to a portion of the money each year, until age 59 ½, without the 10% tax penalty. You have to do what is referred to as a “72t.” The IRS will look at your “nest egg” and if you are age 50-55 let you access to about 5-6% of that money without the 10% penalty. If you are 56-59, they will usually allow you to get to 7-8% of the money. So you do have options…I personally recommend living off your accrued time payouts first, then your deferred comp, leave your pension for the last to draw from…it is usually most people’s largest sum of $$$.

I have a question if you retire as a topped out sgt/officer with twenty years of service what will the lump sum be at the age of 43 ?If you take say 1/2 or 1/3 of your money what kind of tax/penalty would you be facing? and what would you monthly check look like. Now if you take all in lump sum Off/Sgt approximately how much tax hit??

So far the majority of the advice given on this thread is half corrrect. If you have questions about retirement why don't you just approach one of the pension board members and ask them.

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