When to retire?

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Is it better to retire after the first of the year for tax purposes or would it make much of a difference to retire in November? Someone told me it's better to go after the first of the year.
There are many different factors to consider when deciding when to retire with taxes being just one of them. MOSERS can provide you with different benefit estimates so you can compare your options but, ultimately, the decision about the “best” time will depend on your individual circumstances.

As it pertains to taxes, if you are eligible for BackDROP and elect it at retirement, you will be taxed on the lump-sum cash payment for the year you receive it if you don’t roll it over to a tax-deferred, qualified retirement account. The later in the year it is, the more taxable income you may have (from your employment plus BackDROP plus any other sources). Having a large spike in income in one year could result in you paying a higher percentage in taxes that year.

See our Special Tax Notice Brochure for information. In particular, if you are younger than age 59½ and don’t roll over your BackDROP distribution, you may also have to pay a 10% additional income tax on early distributions. If you elect a rollover (into the MO Deferred Comp Plan, for example) and defer the taxes, the time of year of your retirement doesn’t matter for tax purposes.

We encourage you to consult with a professional tax adviser before making your retirement decisions.
You may also be interested in a related topic on potentially utilizing the cafeteria plan to save taxes on medical insurance premiums during the remainder of the year in which you retire.

You may also be interested in a related topic on potentially utilizing the cafeteria plan to save taxes on medical insurance premiums during the remainder of the year in which you retire.  Print Friendly and PDF

Retiree COLAs?

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When will retirees receive their COLAs?
COLAs are payable on the anniversary of your retirement date (for most retirees). The exceptions are:

  1. Retirees who converted from MSEP to MSEP 2000 during the conversion window in 2000 will have COLAs payable in July.
  2. Retirees who elected a BackDROP will have COLAs payable on the anniversary of the BackDROP date.

You can read more in the article we posted on our website when we announced the COLA rate in January:
https://www.mosers.org/MOSERS-News-Archive/2016/2016-COLA-Rate-Determined.aspx 

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