Posted: 8/24/2012 4:21:42 PM EDT
| I know this is hypothetical, but our company has a pension plan, is there anyway to get a lump sum or buy out if you retire from a company early, say 50-55. The plan says you cant get paid til 65 at XX amount each month. |
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If it's a 401 you can't touch it until 59 &1/2 or you get the penalties.
Rolling it into another qualifying IRA without cashing out is certainly allowed. If it's a Gov plan like a 457 or the like then I think you can do whatever you want after separation, and retirement age. Of course any income is taxable so plan accordingly. Are you retiring or resigning? Unless you really need it make ends meet, don't touch it. I am not a financial planner just stayed at a Holiday Inn. |
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The pension is NOT a 401k, I have a separate 401k thru the company. I was just basically thinking out loud, personally, id like to have the lump sum now. to do what I want instead of waiting.
I guess it would be considered resigning but more like an early retiring. It wont happen for another 10years, but hoping to retire around 50-55. |
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Quoted:
The pension is NOT a 401k, I have a separate 401k thru the company. I was just basically thinking out loud, personally, id like to have the lump sum now. to do what I want instead of waiting. I guess it would be considered resigning but more like an early retiring. It wont happen for another 10years, but hoping to retire around 50-55. No, a pension is not a 401k, but some plans allow you to transfer it tax free into an IRA. Mine did. If you want the money to spend now, you will have to pay taxes on any funds that have not been taxed so far. I retired at 50, went back to work at 56 cause I got bored. Just retired again yesterday at 63. Doubt I will ever work for anyone but myself again. If you want to retire early you better save and save and save, and put your money in investments that will keep up with inflation. If you forget or fail to do either one, better plan on working till your dead. |
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It is really dependent if your plan allows an employee to buy it out. If your plan allows it, it will most likely be pro-rated according to how early you leave before you are fully qualified. Most retirees only draw off the pension for about 15 years. So they will pro-rate your lump sum and give you the current value for 15 years. If you plan to retire at 55 what are you going to do after age 70?
To be honest, if your plan allows it, my back of the envelope estimate if you retire at 55 will mean you will get very little after pro-rating and current value for 15 years. Every plan is different and my estimates are based on some of the more common features available on other plans. It may or may not apply to yours. This would be different from a corporation offering early retirement. In that case they will probably fully vest you and current value you 15 years. |
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A defined pension plan is becoming a rare thing these days. Many companies have terminated their plans and if you are below age 55 you may or may not get a buyout offer. If you are in your early to mid forties you will be lucky to see that pension in it's current form.
My company (big pharma) recently canceled their plan and converted the balance to a 401k. Those of us age 50 and over were given the option of staying with the defined benefit or take a cash buyout into a 401k. New employees get a 401k for retirement. |