Pension Plan question
Neil Jones
I have worked for a major corporation in the past when then still
offered their pension plan along with the 401K plan. I lost my job with
that company after 8 years of working for them. There is some pension
plan money for those years of service. Now, I am 46 years old. Is it
possible to withdraw that pension plan money without being penalized? I
know 401K does penalize you for early withdrawal. Is it the same rule
for company pension plan as well?
Also, is it possible to transfer the pension plan money into some
investment account (stocks etc)? Is it good to leave it with the same
company that is managing the fund or move it to my new company's 401K plan?
Thank you in advance for any advice/pointers and help.
NJ
Travis Jordan
> I have worked for a major corporation in the past when then still offered
> their pension plan along with the 401K plan. I lost my job with that
> company after 8 years of working for them. There is some pension plan
> money for those years of service. Now, I am 46 years old. Is it possible
> to withdraw that pension plan money without being penalized? I know 401K
> does penalize you for early withdrawal. Is it the same rule for company
> pension plan as well?
Was the pension plan (technically this is a "defined benefit" plan)
traditional or portable? Most likely it is the former, and in this case you
do not have access to it until you reach retirement age as set forth in the
plan description. Usually this will be your normal retirement age which
could be 62 or higher. Your plan might provide for monthly payments, a
lump-sum option, or even no payment at all depending on the specifics of
your employment and the provisions of the plan.
Contact your previous employer and ask for a copy of their pension plan
description.
clams casino
> Hello,
>
> I have worked for a major corporation in the past when then still
> offered their pension plan along with the 401K plan. I lost my job
> with that company after 8 years of working for them. There is some
> pension plan money for those years of service. Now, I am 46 years
> old. Is it possible to withdraw that pension plan money without being
> penalized?
Typically, you must start pension withdrawals either effective on your
last day or when you hit 62 / 65 - depending on your particular plan.
Some newer plans are portability which may have a different set of
rules. You will need to contact your ex-employer to confirm how your
pension pan applies to you.
> I know 401K does penalize you for early withdrawal.
Not necessarily. A 401K can be rolled over onto an IRA and there are
some exceptions for early IRA withdrawals without penalties (72T
exceptions), but taxes will be due.
> Is it the same rule for company pension plan as well?
Pension payouts prior to being 55/ 62 / 65 (depending on your plan)
have no penalties, but once you leave the company, you will likely not
be able to receive any pension payout until you reach a specified age
(as defined by your employer's plan), with the exception of some of the
newer, portable plans. It's unlikely they will offer a full payout
after you leave the company.
>
> Also, is it possible to transfer the pension plan money into some
> investment account (stocks etc)?
Some plans allow for a full payout which can be transferred into an IRA,
but typically that payout is an option available only on the day you leave.
> Is it good to leave it with the same company that is managing the fund
> or move it to my new company's 401K plan?
That depends primarily on the old vs. new investment options.
>
> Thank you in advance for any advice/pointers and help.
Best advise is to confirm any suggestions you receive with your
ex-employer as there are very significant differences between pension
plans.
>
> NJ
rick++
> Some plans allow for a full payout which can be transferred into an IRA,
> but typically that payout is an option available only on the day you leave.
I have a small one that allows me to do this a any time.
Then you could annuitize the pension and take out some without
penalty.
The large issue is the lump sum may be very small - on the order of
$10K
for eight years of service.
At age 48 is only 1/3rd what it needs to be at age 65 under average
pension
plan deflators.
The lump sum tends to grow as square of the years of service. For an
employee in their 20s it may just be a couple hundred dollars a year,
but by the time they are in their 60s its growing tens of thousands
per year.
Thats why companies dislike these and are dumping them as fast as
possible.