CosmicDebris: Pension payment at age 55 with no 10% tax penilty?

[FlyingRon]

I need to verify that in the below example I do not have to pay the 10% tax penilty for early pension payments if I take the monthly anuity.

1: I am age 55 in the year I separated from my parent company
2: My company was sold to another company and my former parent company holds my pension
3: I am being offered a monthly anuity or a lump sum
4: I still work for my company under a new parent company
5: I did not contibute to the fund at all

regards,
Bill

I'm starting a new thread rather than following up your post in a long dead thread.

If you are 55 or older , you are not subject to the 10% penalty regardless of whether you take it as a lump sum or the annuity. It is taxed as regular income as you receive it.

Alternatively, you can roll it over the lump sum into an IRA and not pay any taxes on it at all now. This might be a better idea if you don't trust how the company currently has your money invested. You can take control and withdraw it on whatever schedule you want (again, taxed as you withdraw).

You could also pay taxes on it now and roll it into a Roth and then you won't be taxed at all on withdrawals.

 

[AdjunctFL]

If you are 55 or older , you are not subject to the 10% penalty regardless of whether you take it as a lump sum or the annuity. It is taxed as regular income as you receive it.

To clarify that point for anyone else reading this post who might look at it out of context, it is correct because the OP left their job. If he/she had not retired or left their job the amount would have been subject to the premature distribution penalty unless they were over 59 1/2 when received or met some other exception.

 

[cosmicdebris]

Thanks Ron

I'm starting a new thread rather than following up your post in a long dead thread.

If you are 55 or older , you are not subject to the 10% penalty regardless of whether you take it as a lump sum or the annuity. It is taxed as regular income as you receive it.

Alternatively, you can roll it over the lump sum into an IRA and not pay any taxes on it at all now. This might be a better idea if you don't trust how the company currently has your money invested. You can take control and withdraw it on whatever schedule you want (again, taxed as you withdraw).

You could also pay taxes on it now and roll it into a Roth and then you won't be taxed at all on withdrawals.

Thanks for the quick reply Ron. Ex-Parent Company is UTC so I have no worries there. I think I am going to take the monthly payments and use the extra cash to pay off all my debt so when I do retire in maybe another 5 years I will be debt free.