Pension to IRA
I have a client who is starting to take his monthly pension from the PBGC. It will be around $1500 a month. He is still working. He wants to take the monthly payout and put it into his IRA. The way he has it set up is for the pension to deposit his check into his savings account then each month transfer from the savings account into his IRA as part of the 60 day rule. Can he do that each month? Can you take a monthly payout (not a lump sum) and place it into an IRA? Thanks for the help.
Permalink Submitted by Alan Spross on Fri, 2012-03-16 02:37
No, he cannot roll the PBGC payments into his IRA because the payments do not qualify as an eligible rollover distribution since they are paid over the client’s lifetime. See the following explanation of an eligible rollover distribution which also indicates what is NOT eligible for rollover:
http://www.retirementdictionary.com/definitions/eligiblerolloverdistribu…
That said, he can use the funds to make a new regular IRA contribution since he has earned income. He might be eligible for a Roth IRA contribution, but a traditional IRA contribution may not be deductible if he is currently covered by a retirement plan at his present job, or a spouse is covered by such a plan. Even then, a regular IRA contribution is limited to 6,000 for those who have reached age 50. And if he has a 401k at his current job, he should defer as much as possible to reduce his taxable income which is increased by 18,000 as a result of the pension payout.
Permalink Submitted by Matt McMillon on Fri, 2012-03-16 17:58
Thanks. That is what I figured.