Pension rollover
I retired this year and will be 70 on September, 2016. I have a company pension with option for monthly payments or lump sum payment. I am considering the lump sum so I can leave un-spent money to my daughters. Do I rollover to traditional IRA or Roth IRA or mixture of both? I am concerned about the RMD and tax hit. Any advice or comments would be appreciated.
Permalink Submitted by Alan - IRA critic on Sat, 2016-04-16 20:56
If you elect the lump sum, you would do a direct rollover to an IRA. If the pension is 100% pre tax you would roll it to a TIRA, and then convert incremental amounts to a Roth IRA if you see that as an advantage after analyzing your expected tax rates in retirement. However, whether you take the monthly annuity or RMDs you are going to pay taxes. If you do Roth conversions you will pay even more tax up front to potentially save on taxes by eliminating RMDs down the road. You might want to visit a financial planner with regard to the initial decision of the annuity vs the rollover. If you decide on the rollover, then you determine how much if any to convert to a Roth IRA. Note that any conversions you do starting next January can only be done after completing your RMD for that year.