pension rollover?
I will be turning 60 in 2022. I have a pension from a company that i worked for 25 years ago. I am fully vested in the pension. I have been recieving communications from that company that i can take a lump sum or an annuity. Starting at 60 and have until i am 65 to do something. The difference between taking at 60, 154k and at 65 166k (projected.) So i am thinking i will take that money at 60. So basic question . What is the tax implication on that money? ( is this taked as regular income or some sort of percentage. if i take it in a lump sum. Or what can i roll the money over to defer the tax implication. if so will the tax implication be less. I will not officially ” retire” until my normal retirement age of 67 where social security projections are around 3.4k a month.
thanks
Terry Says
OK, basically and in most cases, (but be sure to ask the pension trustees), you can defer any taxes by doing a direct rollover of your lump sum pension distribution. Read this page from the IRS on the rules. Otherwise, it would be taxable as ordinary income in the year it is received.
Now, where would you roll it and how would you invest it?! I would suggest contacting Fidelity or Vanguard about a direct pension lump sum rollover. Do not take the check yourself. They will help handle the money transfer so it is not taxable. And they will provide basic investment advice.
But I think this would also be a good time — before you make any moves — to consult with a Financial Planner who is FEE-ONLY and a FIDUCIARY who puts your interests first. Even one or two consultations could help you make a better financial plan. For example, you might decide to wait til age 70 to maximize your SS base (on which future inflation adjustments will be made) and instead take taxable withdrawals from the pension rollover.
To find a Certified Financial Planner who is a fee-only fiduciary, search at www.Wealthramp.com.
