I live in Oregon. My wife is unable to continue working due to clinical depression and fibromyalgia. She has been with her company 15 years and has a fully vested Pension
Equity Plan in the amount of $45k. According to her company policy, she is able to take this money with her upon termination of her employment with the company--either as a rollover into another retirement
account or as a lump sum pay out. In July she began receiving temporary disability
payments through her company's third party insurer (USAbleLife). The temporary disability ran out in October and the insurer is processing her claim for long term disability. She is working on Social Security Disability paperwork but we don't expect for her to be approved by the government
for this for quite some time.
Is there any way around the 10% tax
penalty for taking this pension in a lump sum pay out? I am currently unemployed and studying for my real estate license, with the long-term goal of supporting us
just on my income
. If we take the lump sum payout, our income for this year will still be a bit less than what we made in years past with both of us working full time (our household income last year before taxes was $85k).
If it comes down to it, I think it's worth paying the 10% tax penalty on the $45k, which would still allow us to walk away with $40,500. This would give us a lot of breathing room to get my real estate business going while also continuing to put food on the table
Given our situation, is there anything I'm missing, and does it sound like we're making a good decision on this?