Retirement Surprise

Retirement Surprise

April 20, 2016 – “Lynn” called me recently for help with a few structured settlement annuities I helped place on her behalf about five years ago.

Our firm occasionally fields calls from former clients who are moving, changing beneficiaries or banks and simply need help submitting the correct documents to make sure their money arrives on time as scheduled.

I always enjoy these exchanges because I get great feedback on the client’s structured settlement or retirement annuity experience several years removed from their decision.

Back in 2011, Lynn chose to structure a portion of her automobile accident claim settlement as it was resolving. Still working at the time, she liked the idea of deferring some of her settlement proceeds into future guaranteed tax-free income designed to coincide with her planned retirement a few years down the road.

With retirement now just a few weeks away and her first annuity payments scheduled to begin, she needed to fill out the appropriate EFT forms so her funds could be automatically deposited into her chosen bank so her pension and structured settlement cash flows would be properly aligned.

One of the questions on the standard EFT form had to do with tax withholding. She wasn’t sure which box to check when asked whether or not to withhold taxes having completely forgotten that structured settlement payments are 100% income tax-free when paid as a result of a personal, physical injury.

aechanWhen I reminder her of this fact, her response was priceless.

“YAAAYYYYYYY!” she involuntarily and quite enthusiastically shouted.

Her excitement was contagious and I smiled as she offered all the reasons this was such welcome news:

Combined with her retirement income and Social Security, her combined effective tax rate in retirement would be lower;

It was an empowering sense of freedom and relief from having to pay higher taxes;

With prices increasing, not having to pay taxes on this income would help her money go further.

Her parting sentiment as we were hanging up is the kind of thing that always makes me feel so great about my career choice:

“You absolutely made my year!”

Glad to be of service Lynn. Thanks for sharing. Knowing I played some small part in you looking so forward to a happy retirement makes MY year!

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