retirement fund advice

[Gregadd]

What is the tax penalty for cashing out pension plan. My sisters company has elected to end company contributions. She wants to cash out. and invest elsewhere.
What might be some options.

 

[DonH50]

20% excise tax last I checked. But, she should be able to roll it over into an IRA with no penalty. She should talk with a financial advisor, CPA, CFP, etc.

 

[Bruce B]

Some companies will not let you touch it unless you are no longer employed with them.

Plus, you need to check the contract as you may have a 10% penalty if you are 55 or younger.

Don is correct, they take 20% off the top unless you can roll over into another investment.

 

[mauidan]

20% excise tax last I checked. But, she should be able to roll it over into an IRA with no penalty. She should talk with a financial advisor, CPA, CFP, etc.

It's not an "excise tax."

It's a required 20% federal income tax withholding if you withdraw money from a qualified plan.

The fact that a company has elected to end company contributions, doesn't mean that the plan's investment options have suddenly tanked or can be outperformed.

I'd talk with the plan's administrator before doing anything.

 

[Gregadd]

She is 59 years old.
Do they require payment to the spouse?

 

[LL21]

If she wants to move it and reinvest for retirement (rather than spend it), i would see if she can 'roll it over' into one of her existing qualified retirement accounts (IRA, etc). That way, no tax hit since she is not withdrawing from her pension, simply moving the retirement monies to a different money manager.