Expert: Allen - 4/26/2007

Question
QUESTION: I am 57 1/2 years of age.  The company that I retired from has a company funded pension and also a 401K plan.  I would like to rollover the company's pension to a Rollover IRA.  Can  I still leave the 401K at the company which I plan to rollover when I reach 60.  I was informed that when I set up a 72t distribution, that I would need to rollover both.  Is this correct?
ANSWER: A couple of comments:

1. The law itself doesn't require you to take distributions from both plans at the same time. However, your former employer's plans may have this requirement. The best way to check is to look at the Summary Plan Descriptions which were provided to you when you became a participant. If you can't find them, you can request copies from the plan administrator. If you can not find this requirement in the Summaries, ask the plan administrator to show you the language where it's required.

2. I don't understand the reference to 72t. Section 72(t) of the Internal Revenue Code deals with the 10% penalty on distributions before 59 1/2 which are not rolled over to an IRA. However, you are planning on rolling.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your reply.  I will follow up on your response to item 1.

What I trying to find out is if there is a way to take funds from the company funded IRA on an as needed bases to paid for expenses though out the tax year.  I know that I will need to pay the Fed/State taxes.  I trying to avoid the 10% penalty.

The amount in my pension is less then $200,000.  I would like to get $30 - $50 per year based on my needs.  Is there away to do this?
Thank you in advance for you response.


Answer
You are confusing a few terms. But I think I can give you an answer, although it may not be the answer you want.

The company (and probably you) has funded a pension and 401k plan. You can elect to roll the money in the plans to an IRA. Once it's in the IRA, you can have money paid to you. Under most circumstances there is a 10% penalty on any money paid to you from either the company's plans or an IRA. There are a few exceptions. Under one of the exceptions that applies to an IRA, you can elect to withdraw a certain amount and you must withdraw the same amount for 5 years. However under this option the most you could receive is about 9% of the assets.