Expert: Allen - 11/14/2008

Question
Aloha!  This question is for my dad.  He is 60 and wants to take out his pension.  His company said that he could only do that if he retires or quits.  Is that legal?  Also would he still have to pay taxes?  Mahalo...

Answer
It probably is legal. It all depends on the terms of the plan.

Some plans allow what are known as in service distributions after a participant reaches a certain age or has a certain length of service. Others only allow distribution when the participant is no longer employed by the company. It sounds like your father's plan has the later provision.

Income taxes are due on distributions from pension plans that go to the paticipant or his beneficiary. Taxes are delayed if the money is transferred to an IRA.

I'm jealous that you're in Hawaii and I'm here on the east coast awaiting the arrival of winter. Please send some sunshine our way.