(OT)..Pension and tax

[n1stunnor]

I know jack shi@t about this so..maybe a little help from my friends.I received a letter today from my former employer asking me if i wanted to receive my earned vested pension in a lump payment now or roll it over into an IRA.

If i take the lump payment now will i get taxed on it and how much?

[Wake up CALL]

You will pay an immediate 10% early withdrawal penalty and the balance will be added to your 2003 income as earned income. This is assuming you accept the withdrawal in 2003. I reccommend rolling it over into a self managed IRA.

[MtSmalls]

I would need a little more information on the type of "pension". If it was a defined benefit plan (i.e. you accrued the payment based on years of service and final pay level), I believe it is merely taxed at your normal income level (think of it as an oversized paycheck) including social security etc.

If it was from a defined contribution plan, i.e 401K or other plan that YOU personally contributed a certain amount every year/month/paycheck, then you would pay a penalty (10%) plus your normal income tax rate.

If you roll it over, it has no effect on your taxes now. You can hold on to it until 59 1/2 when you can start withdrawing without penalty, but still pay whatever your normal tax rate is at that point.

There are LOTS of little details, and that is where the devil is. Contact the human resources dept of your former company (if there is one) and get the pros and cons.

[n1stunnor]

If it was a defined benefit plan (i.e. you accrued the payment based on years of service and final pay level), I believe it is merely taxed at your normal income level (think of it as an oversized paycheck) including social security et


That would be it...Thnaks for the replies.