Can You Deduct Buying Back Years of Service on Your Pension? Ask The Hammer: In this episode of Ask The Hammer, Jeffrey Levine from Buckingham dives into whether buying back years of service on a state retirement plan qualifies for a tax deduction.
While typically contributions to retirement plans are tax-deductible, buying back service likely isn’t. The money used for the buyback is likely after-tax dollars, resulting in a tax basis in your pension. This means a portion of each retirement check will be tax-free, but the total deduction won’t be as significant as a traditional contribution.
Levine emphasizes that the decision of buying back service depends on individual circumstances. Factors to consider include life expectancy, risk tolerance for investment strategies, and the guaranteed income a pension offers. Pension buybacks can be valuable for those seeking a predictable income stream and peace of mind in retirement.
Levine concludes by highlighting the benefits of a pension’s guaranteed income and how it can ease the burden of future income planning.
Watch this video to get the answer to the question, Can You Deduct Buying Back Years of Service on Your Pension? Or catch more Ask The Hammer episodes at this link: https://www.finstream.tv/videos/ask-the-hammer/