Expert: Allen - 7/14/2010

Question
Want to take a lump sum pension of $147,000. I am 62 years old and retiring. How much tax do I have to pay on the lump sum. As I am selling my house and leaving the state.
Thank you.

Answer
The distribution will be taxed like any other taxable income. In other words the tax will be the same as the tax you would have to pay if you received a bonus from your employer. It will therefore be at a high rate since the distribution is on top of your regular income this year.

You may be able to lower the amount of tax by having the lump sum rolled to an IRA. You can then take distributions from the IRA over several years.

You may also want to look at the state tax situation. If you live in a state that has a high tax rate and are moving to a state with a low or no tax rate, you will save on the state tax by delaying the distribution into one or more later years.