Can I take a lump sum payout for my vested union pension if I had a uncurable diagnosiousof some sort?
Posted by Dolores
excavator82 asked:
i have a pension , vested, and would like to know if i had a incurable conditon, if i could take a payout on my pension assuming i wont make it to collect.
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i have a pension , vested, and would like to know if i had a incurable conditon, if i could take a payout on my pension assuming i wont make it to collect.
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March 16th, 2010 at 4:15 pm
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Perhaps; but, only the administrator of your pension fund is qualified to answer your question. Contact your pension fund administrator.
March 19th, 2010 at 1:23 am
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Every pension plan is different among companies, and the rules for early withdrawal differ from state to state. I can tell you of my experience though. I live in Arkansas and last year I left a company I had been with for 11 years. I had this great plan to sort of start over with a clean slate. I took my pension payout instead of rolling it over so I could pay off all my small bills, you know the ones that drain you every month with a $10.00 or $15.00 payment. I knew up front that I would have to pay taxes on the amount and would be charged a 20% penalty for early withdrawal. That was hard to swallow because it added up to almost $6,000.00. I went ahead and did it anyway, paid off my small bills, and went about my business. I thought the worst was over…I have never been so wrong in all my life! Turns out the government felt like it didn’t take enough of my pension in taxes so I got taxed again when it came time to file. Additionally, they added the entire amount of my pension as income on my return and it looks as if I earned almost twice as much last year as I really did, which in turns cuts me out of any financial aid for school for at least another year (I’m no spring chicken, I need to get started right away). When I signed up with the tax advocacy service to help me they looked at my salary plus the payout as a total and said I had the means to pay the taxes and I would have to pay. Now for the next five years I have to pay $140.00 a month to the IRS!! Be very, very careful if/when you take a pension payout…get ALL the facts surrounding what will happen if you take a lump sum. There was an option when I took out mine that if you were taking the payment because of a catastrophic illness/disease you might be exempt from paying the early withdrawal penalty, but like I said I believe the rules are different for every state. And also beware of your Pension Administrator because mine did not tell me even half of what I’ve told you here. Consult a tax professional about penalties. Good luck.