Distribution from traditional pension plan to IRA

Submitted by alberto vega on Fri, 2020-01-17 06:51

Single individual age 40 his job was eliminated in a restructure on 12/1/2019 has a traditional defined benefit pension valued
at $ 95,000 as of 12/31/19 (all funds put in were company money). One option given to him is to convert it to an annuity about $320 monthly for life, however if he does
not select a distribution option before he dies, and then he dies he gets nothing.

Therefore he is thinking of rolling over his pension to a traditional conventional IRA now in 2020. Questions:

1. If he does a trustee to trustee rollover , from the pension plan to a traditional IRA is this rollover tax free to him now? Therefore he can end up with $ 95,000 in a traditional IRA that he can control and would not lose $ .
2. As long as he does not pull $ out until age 59 1/2 he will pay no tax now or at least up to age 59 1/2
3. If he dies prematurely but after he sets up the IRA, his beneficiary will inherit the IRA at full value without paying any income tax when the beneficiary receives the money?
4. If he takes the $320 monthly option, all of it will be taxable to him as he receives it?



Submitted by Alan - IRA critic on Fri, 2020-01-17 14:49

  1. Yes, that is correct. He would request a direct rollover, and there will be no withholding.
  2.  Correct.
  3.  Also correct. The beneficiary will not be taxed until they take distributions, and will never pay a penalty on distributions from an inherited account. If beneficiary was a spouse, the spouse could roll it over to her own IRA.
  4.  Yes, as well as 10% penalty.
  5.  If rolled to an IRA, if next employer’s plan will accept IRA rollovers, he will have the option of rolling the IRA into the new employer’s plan, or any future employer’s plan. 

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