I am 63 years old, I have been informed by a former employer that I can take a lump sum, or a monthly payments, or do nothing. I feel that this company will not be around in the coming years before I can retire. If I take a lump sum from this plan, do I pay taxes on this or should I set up an IRA with my financial institution?.

Terry Says:

You need to ask the pension plan (and be specific, not necessarily the HR person at your company, but the  pension plan custodian) whether this money qualifies for a tax-free rollover.  If that is the case, and because you are only 63, I would suggest contacting Vanguard or Fidelity — not a broker!!! — and asking them to handle this as a direct rollover so no taxes are involved.   Do NOT take a check from the plan!

The money will continue to grow tax-deferred in the rollover account, and they will give you advice about diversification of investments.  then when you start withdrawing — at age 70-1/2, or sooner — the withdrawals will be taxable at then-current income tax rate.  Be sure to name a beneficiary!

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