Can I access pension at 45?! (Laid off, receiving not-enough severance)

[phdezra]

What is the name of your state (only U.S. law)? NY

Hello everyone. I am 45 yrs old. Not a "new" story, but like many sadly, I have been laid off after 10+ years of good unemployment. I am 45 yrs old with 'two pensions'. When I log on to Fidelity this is what I see (and I'll also add what I know to date), but looking for advice here on HOW to best access #1, even if I have to pay a penalty of 10% etc. So, here is what Fidelity shows me:

1) Company X Pension: Your estimated benefit is $241,090 Lump Sum, based on an assumed retirement date of January 01, 2037. Our records indicate that you separated from employment on June 30, 2015. This is your benefit assuming you commenced your benefit at age 65 years 0 months. Current vested percentage: 100%.

2) Company X [same company] Excess Benefit Pension. Your estimated benefit is $11,900.00 Lump Sum, based on an assumed retirement date of May 01, 2016. [This calculation is based on when I was terminated.]
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I am not concerned about #2 above, as I know the company is required to pay out this amount after 6 months for date of termination (not for date of last severance payment) because they no longer have a defined benefit plan. So disregard #2.

How do I get at #1 though? Do I roll it into an IRA now and then take an early withdrawal, yes with penalties because I need the money. Do I need to wait x months and THEn roll it to an IRA dn doe an early withdrawal (yes, with penalties) because I need the money (!). Any ideas (legit ones) appreciated. I am not thrilled at the idea of paying a penalty, but I need the funds.Is the $240k locked up until age 60-65? Ideas?

Thank you.

Jim

 

[FlyingRon]

You'll have to look at the plan documents. Unlike IRAs and 401Ks and the like, there's not any obligation for them to allow you to roll it over or take an early distribution.

 

[phdezra]

You'll have to look at the plan documents. Unlike IRAs and 401Ks and the like, there's not any obligation for them to allow you to roll it over or take an early distribution.

The plan documents allow me to roll the $240k to an IRA. SO, fast forward six months from now. Can I do an early withdrawal from an IRA?

 

[FlyingRon]

The plan documents allow me to roll the $240k to an IRA. SO, fast forward six months from now. Can I do an early withdrawal from an IRA?

If it is a traditional IRA you'll pay normal income tax on the money when you take the distribution. No matter what form of IRA it is, you'll pay a 10% early distribution penalty if you take it out before 59 1/2 (barring disability or other permitted uses which don't appear to apply here. Just being unemployed is not qualifying).

If you took the entire $240K out at once you'd pay a $24,000 penalty, around $80,000 in federal income tax, $15,000 of NY State Income tax, meaning you'll pay a bit more than half in taxes and penalties.
There will also likely be some hit to churning the money through whatever investment the IRA uses.

If you absolutely must take money out (it's not really advisable at all), take out only as much as you need each tax year. The tax bite will be lower and you'll preserve the principal and keep it working.