Mr Smith

Mr. Smith a teacher earns $60,000 in salary. He pays $8,394 federal tax, $2,310 state tax, $4,590 in payroll tax (social security and Medicare) and $1,200 in pension (2%) and he nets $43,500. This is filing as a single man to simplify things but filing jointly with a wife who earns the same would work out to the same result. He started to work at age 28 and is now 62 and decides to retire after 34 years. He gets 2% of $60,000 times 34 years or $40,800 per year pension. His social security is $13,600 per year so his gross income is $54,400. He pays $6,781 in federal tax, $2,090 in state tax so his net income is $45,529. Since this is $2,000 more than his current net pay he decides to retire. If he cannot live on his current salary he can work past 62 and then retire at more than his net. Also if he enjoys his work and is in good health he can keep on working and will retire at more than net a few years down the road.