Expert: Allen - 10/25/2006

Question
I am thinking of retiring next year (at age 57-3/4)and we are allowed to take a lump sum on our pension monies.  Is there a way to roll it over to a Money Market account where you can write checks out of it (and pay the taxes on only what I write checks on during that year).....OR can I do the same thing with an IRA?  I would prefer that over a 'set amount' annuity per month.  Is that an option?  
I also have a fairly large 401k that I KNOW I will be rolling over and will not be touching that for several years.  I would just like to live off of the money from my lump sum pension for the first few years.  Thank you.

Answer
When you receive the distribution forms for the pension plan, you will want to elect a rollover to an IRA. You can setup the IRA with a mutual fund company (Vanguard, Fidelity, etc.) that offers a money market account as one of their mutual funds. You will have to indicate on the distribution forms which company you are setting up the IRA account with.

There is one thing to be aware of. You will have to pay income tax on withdrawals from the money market account. In addition, if you withdraw money before you reach age 59 and 6 months, you will have to pay a 10% excise tax. Therefore, if at all possible you should delay withdrawals.

Enjoy your retirement.