Getting a Golden Boot into Retirement: What's Next?

At some point in your career, you might have to deal with the golden boot. This is a term for certain methods companies use to induce someone to retire. Here are the basics of the golden boot and what it might mean if it happens to you.

Golden Boot

When a company gives you the golden boot, it is almost as if it were nicely asking you to leave. With this type of program, the company will offer you extra financial incentives and benefits if you will retire early. For example, it might make a substantial contribution to your retirement account if you are willing to leave now.

Why This Is Done

There are a few different reasons that companies will use this technique to get rid of employees. Typically, this happens whenever a company wants to scale back its workforce. This can also happen whenever a company wants to hire younger employees so that it can pay them lower salaries than it is paying a more experienced workforce. When a company wants to go younger, it cannot just fire an employee because he or she is too old. This would qualify as age discrimination, and the company could face multiple lawsuits. In order to avoid these massive lawsuits for discrimination, the company can provide incentives for the employee to leave on his or her own. When this happens, the company is not at fault and will be able to avoid any litigation.

Consult a Financial Planner

When you are suddenly thrust into retirement, you should most likely consult your financial advisor. At this point, you will have to look at your options when it comes to using your retirement assets. You might have a 401k, an IRA, a Roth IRA, an annuity or some other type of retirement plan in your portfolio. Now that you are ready for retirement, you need to decide how to handle payments from these investments.

Monthly Expenses

Determine how much money you will be spending on a monthly basis during your retirement years. In some cases, you will be able to cut back on certain expenses because you will not be going to work anymore. You may be able to save some money on gas, eating out, clothing and other work-related expenses. Come up with a projected monthly budget so that you will know how much of a payment you will need from your retirement sources.

Tax Implications

When you are deciding how much money you want to withdraw on a monthly basis from your retirement assets, you should consider the tax implications of your decision. You want to be able to withdraw enough that you can live comfortably and have a little bit left over. At the same time, you do not want to withdraw too much because this will result in paying more taxes to the government. Make sure that you do not put yourself into a higher tax bracket by taking too much money out of your retirement plan.

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