Many jobs offer benefit packages that include a pension plan. These plans can be very helpful to people later on in life, especially if the person works for a company long enough to see the pension plan come to maturity. However, there are situations where people have paid into a pension plan, but leave well before the pension can be put into action. In this case, many people may not be exactly sure how to proceed.
Transfer Pension Funds
One of the best things to do is to roll over or transfer the funds that are in an existing pension into a new type of retirement savings account. The question that many people ask is how to make the most of a pension transfer ? There are a number of different factors that go into answering this question.
For people that are 55 years of age or older, there are a few options. For example, if a person is in a defined benefit pension plan, at the age of 55, they can begin to take monthly payments from it. For people who are younger, perhaps in their mid-30s, while the option for monthly payments isn’t available, a person can take a lump sum payment in lieu of monthly payments in a defined benefit pension plan.
Take Taxes into Account
It is important to understand that while not all of the lump sum will be taxable, a portion of it is going to be taxed by the IRS. However, with the tax rates being so low, many people in this age bracket tend to go with a lump sum payment. In addition, the rest of this money can then be transferred into a a preferred account for investments and retirement savings. Fortunately with a defined contribution pension transfer, which most pension plans fall under these days, the transfer of these funds are completely tax free if they are going into another pension plan or retirement savings account.
If you want make the most pension earning potential, it’s quite easy to achieve. A person may need to understand how to pension transfer funds from one account to another, and this may require professional assistance. Fortunately, there are plenty of options and it’s not hard to figure out how to make the most of a pension transfer.