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Interesting, as I've worked with government employees for years and have never had occasion to run into an issue such as yours. I take it this is a state govenment?

I can't quite conceptualize what the 'bonus' you refer to is. It could be an actuarial acceleration of accrued benefits designed to incentivizing early retirement by paying you an early separation lump sum that is actuarialy taken from your pension. If so, this should be able to be treated like any other present value lump sum and rolled over into your IRA. But the $22,000 you indicate you'd receive sounds like the employer is doing a 20% (Fed) plus 6.7% (state?) withholding and sending you what's left as income for the year. If so, this cannot go into a tax deferred account...except perhaps a variable deferred annuity, which I don't recommend due to high expenses and crappy investment choices. You could use growth ETFs which are quite tax efficient, and hold the income producing part of your investment allocation in your IRA, such as REITs, bonds, utilities, etc.

If you put the #22K into a brokerage account and the investment provides an average 5% annual return, the value of the account would grow to $58,370 after 20 years. You don't give the early retirement annuity amount, so I can't calculate what the likely future value would be.

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