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Pension vs Lump Sum - Which One to Take if I Am Not Retired Yet

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  • 03-17-2019, 08:37 AM
    hr for me
    Re: Pension vs Lump Sum - Which One to Take if I Am Not Retired Yet
    Quote:

    Quoting llworking
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    He does have 60 days to put a lump sum into an IRA. However that is NOT what I would recommend. I would recommend a trustee to trustee rollover, where the money never touches his hands.


    If it goes through his hands many trustees will insist upon withholding tax and then that much of the money won't be available for a rollover and therefore taxes will have to be paid on that part.

    you are mis-stating this a bit... the ex-employee has the choice NOW..... It is not a good idea to take a lump sum and pay taxes now, but to rollover which is what the OP stated they were going to do.

    the rollover check is made out to the IRA company FBO (for the benefit of) the employee's name -- NOT directly to the employee's name. The employee CAN'T cash the check even if mailed directly to them and directly in their hands. There is no way for the money to go through his hands while also going to an IRA. The recordkeeper WILL withhold taxes unless the employee gives an IRA company/account...it's the default. But yes, the ex-employee can get cashed out totally and that's a bad idea due to the early withdrawal penalty and taxes....
  • 03-17-2019, 07:44 PM
    llworking
    Re: Pension vs Lump Sum - Which One to Take if I Am Not Retired Yet
    Quote:

    Quoting hr for me
    View Post
    you are mis-stating this a bit... the ex-employee has the choice NOW..... It is not a good idea to take a lump sum and pay taxes now, but to rollover which is what the OP stated they were going to do.

    the rollover check is made out to the IRA company FBO (for the benefit of) the employee's name -- NOT directly to the employee's name. The employee CAN'T cash the check even if mailed directly to them and directly in their hands. There is no way for the money to go through his hands while also going to an IRA. The recordkeeper WILL withhold taxes unless the employee gives an IRA company/account...it's the default. But yes, the ex-employee can get cashed out totally and that's a bad idea due to the early withdrawal penalty and taxes....

    You are describing a trustee to trustee rollover. You are NOT describing the type of situation where the 60 day deadline is applicable. The 60 day deadline is applicable when the taxpayer has the choice whether or not to keep the money or roll it over, once it has been released.
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