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?.
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!