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I will be retiring next month. I have a company pension

plan. I do not contribute...
I will be retiring next month. I have a company pension plan. I do not contribute to this plan. It is completely funded by the company and the monies are held independently of the company. Under this plan, I will receive a pension of $1700 per month for life. However, the plan managers are offering to buy me out of the pension. They are offering a lump sum alternative to the monthly payment. My question is - is this lump sum taxable? And can I avoid the tax by rolling it into a 401(k) plan?
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Answered in 7 minutes by:
3/17/2018
bkb1956
bkb1956, Finance Enthusiast
Category: Finance
Satisfied Customers: 6,656
Experience: IRS Enrolled Agent, 20+ years of experience in tax preparation with associated finance experience.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

The lump sum payment/distribution is taxable in the year received.

You can roll over the lump sum into a 401K or traditional IRA. You can do this by direct rollover or have the money paid to you. You then have 60 days to redeposit the money in a retirement plan account or IRA. In this case, your employer will usually withhold 20% of the distribution for income tax, which means you will have to come up with the 20% from other funds within the 60-day period to complete the rollover in full.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 5 months ago
Thanks. If I roll over the lump sum into a 401k does that mean the tax on the lump sum will be deferred until I withdraw it (slowly) from the 401(k)?

That's right.

bkb1956
bkb1956, Finance Enthusiast
Category: Finance
Satisfied Customers: 6,656
Experience: IRS Enrolled Agent, 20+ years of experience in tax preparation with associated finance experience.
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