What tax factors should I consider when timing my retirement from Eastman?

Retirement timing affects your final year's income, ESOP distribution options, pension calculations, and Social Security strategy. Key considerations: retiring early in the year means lower total income that year (potentially lower tax bracket), but you'll receive ESOP and pension payouts sooner. Delaying may increase pension benefits but pushes distributions into higher-income years. Coordinate all pieces—not just one.

Talley Tax | Strategic Tax Advisory in Johnson City

Eastman employees approaching retirement often focus solely on their pension formula or years of service. The tax planning angle is equally important.

The income stacking problem:

In your retirement year, you might receive: - Partial year salary - PTO/severance payouts - ESOP distribution (if not rolled) - Pension start (if taken immediately) - Beginning of IRA/401(k) withdrawals

If all these land in the same year, you're potentially pushed into a higher tax bracket for that year only. This is often avoidable with planning.

Early-year vs. late-year retirement:

Retiring in January: - Lower W-2 income for the year - More room for ESOP/pension income at lower brackets - But: Receive benefits sooner (could be good or bad)

Retiring in December: - Full year of salary - Push major distributions to following year - But: One more year of earnings credited (if relevant to pension)

The ESOP timing question:

If you're planning an NUA strategy, you need to coordinate the lump-sum distribution with your other income. Taking it in a year with full salary is rarely optimal.

Pension considerations:

Eastman's pension formula considers service years and compensation. Sometimes an extra few months adds meaningful value. Sometimes it doesn't move the needle.

The Social Security overlay:

If you're between 62 and 70, your Social Security claiming decision interacts with everything else. Delaying Social Security creates a "gap" you'll need to fill with other income sources—which affects how you draw from retirement accounts.

The ideal approach:

Build a year-by-year projection: - What income sources hit in retirement year? - What hits in year 2, year 3? - When does Social Security start? - How do required minimum distributions (age 73) change the picture?

Then work backward to find the optimal timing. This analysis often reveals that moving retirement by 2-3 months can save thousands in taxes over the first few years.

**Start planning 2-3 years before retirement**, not 2-3 months.