No. of Recommendations: 0
Jo asks:

<<I am a state employee covered by a deferred compensation plan. I understand that it is not a qualified retirement plan. I may be leaving government employment soon and am trying to figure out what to do with those def. comp funds. Since it is not a qualified retirement plan, I understand that I can't roll it over into an IRA. So, are my only choices then to leave it where it is (poor mutual fund choices, no index fund, etc.) or take the money and pay (GULP) the taxes? Assuming that I do take the money, since I am also covered by a traditional pension, I can't contribute to a traditional IRA, income limits are too high for a Roth, so is my only choice to take 2000 and put in a non-deductible IRA and eat the taxes on the entire amount?>>

A deferred compensation plan is a nonqualified retirement plan. When you leave your job, it cannot be rolled to an IRA. So, you can leave it there until you retire or take it now. When you do take the money, you have to pay income taxes on that sum. About the best you'll be able to do is to take the total in installments over a number of years from a minimum of two to a maximum of about fifteen. Even that depends on the provisions of your plan. Therefore, the plan you have outlined is the best you're gonna do with that money.

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