Transferring a pension to an IRA

By Financial Advisor Hans Smith

Should you take the lump-sum pension payout option and transfer the assets from a pension to an IRA?

When leaving a job that has a pension, you may have the option to take a lump-sum payout. This option allows you to take a relatively larger chunk up front (compared to smaller future monthly guarantees), and transfer the assets over to a personal IRA or investment account.

If done correctly, transferring your pension to an IRA can be a tax and penalty free event. A lump-sum pension rollover often requires some light paperwork, which is something we can help with.

It's important to weigh the pros and cons of each pension income option available, and make a decision that's right for you. While we feel there are advantages to taking the lump-sum payout, it certainly may not be for everyone. Understanding what you are leaving "on the table" is important as well.

Moving funds from your pension into a personal IRA gives you more control over how you'd like to take your retirement income. Instead of accepting the stated monthly amount in the pension annuity option, you have the ability to use the assets for income as you see fit. We can help design a distribution schedule that you are comfortable with.

Pension funds that are rolled over into an IRA can then be invested in our low-cost diversified index fund investment strategy. This provides the opportunity to grow the lump-sum amount over time.

Contact us for investment management, or to discuss your pension options.