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Author: shunk99 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75662  
Subject: Pension Payment From a Bought Out Co. Date: 7/28/2001 4:39 PM
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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?
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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31047 of 75662
Subject: Re: Pension Payment From a Bought Out Co. Date: 7/28/2001 5:41 PM
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If your mother-in-law has some investment acumen and the investment
choices with the retirement plan aren't exciting, then she is likely
to do much better investing on her own.
If she's an investment neophyte who would put the transfer into
money markets, she'd do better leaving it where it is.
If she has a heart condition and her parents died young, to take the money and run makes lots of sense. If her parents lived to be centenarians and she's in perfect health, maybe she'd do well to take an annuity type option.
So you see there are lots of factors involved in the choice of what
to do with a retirement nest egg.
Best wishes, Chris

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Author: phooley Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31048 of 75662
Subject: Re: Pension Payment From a Bought Out Co. Date: 7/28/2001 6:55 PM
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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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Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 31063 of 75662
Subject: Re: Pension Payment From a Bought Out Co. Date: 7/30/2001 8:00 PM
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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?

The last poster said someone might come along and suggest an annuity. I'm not going to do that, but I am going to say don't forget 10 year averaging. The distribution might be eligible for that treatment and then you get all the money, but pay taxes over ten years. Depending on her exact tax situation, it might be more tempting.

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