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URL:  http://boards.fool.com/my-mother-in-law-recently-received-a-letter-from-15464063.aspx

Subject:  Re: Pension Payment From a Bought Out Co. Date:  7/28/2001  6:55 PM
Author:  phooley Number:  31048 of 75335

My mother-in-law recently received a letter from her former employer stating that she would receive a lump sum payment of $x from this employer's pension. The x is not something you can retire on. In fact she's stated that she really can't retire...she plans on working as long as she can. Technically, she'll retire in 5 years.

I just starting looking into this for her. From what I've read so far, the idea of moving this lump sum to an IRA sounds like the best option. I was wondering what I advise other Fools might have. Any thoughts?


Based on the information you have given, I don't think there is much question: deposting the check in an IRA would be the thing to do. I assume the former employers' pension plan would be classified as a "qualified retirement plan."

Quoting from IRS Publication 575 (Rollovers, at <www.irs.gov/forms_pubs/pubs/p575toc.htm>):

If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. You do not include the amount rolled over in your income until you receive it in a distribution from the recipient plan or IRA without rolling over that distribution.

We don't know if there is any plan other than an IRA into which your mother-in-law would be eligible to rollover the proceeds of this former employer's pension plan.

If someone wants to suggest some sort of annuity, they should be along shortly. (Someone may even offer to take you, and/or several other people, out to dinner to discuss the idea!)

Good luck with your planning,
Phooley in Phoenix
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