Ask Terry Questions Inherited Pension Disbursement

Inherited Pension Disbursement

By Terry Savage on April 20, 2024 | Financial Planning / Retirement

My brother past a month ago (54) and named me and my other brother as the beneficiaries. He was not married and eligible for full retirement at 55. The Union Local 150 letter we received explained they have to calculate the pre-retirement amount, then they will contact us to choose how we want the money. I’m guessing one lump sum or maybe yearly. What would you recommend is the best way to take the payment?

Terry Says

I am so sorry for your loss. Ask the Union HR department if you can do a TAX-FREE ROLLOVER (each of you for your portion) into an IRA Rollover account.
If you can, read these instructions:
A rollover will allow the money to keep growing tax-deferred. Depending on how this is paid out into the rollover, you might have the obligation to withdraw the money by the end of 10 years — and pay taxes on it. But that still allows for a nice period of tax-deferred growth.

Allowing these retirement benefits to grow is the best tribute you can give to your brother’s hard work. On the other hand, if you have credit card debt at 20% or higher, definitely use it to pay that off. But ask the union what tax position you are in if you take the lump sum. I’m guessing –but not sure — that you will have to add it to your ordinary income this year, so be sure to save some for taxes!

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