How to Transfer Pension Benefits
Pension benefits are becoming increasingly rare, but if your employer offers a pension plan, you may be able to transfer your plan to a private retirement account when you retire. Pensions are generally offered in one of two ways: defined benefit and defined contribution. A defined benefit plan is one in which your employer promises you a specific amount of money. A defined contribution plan is one in which your employer contributes a specific amount of money to your pension. No guarantee of benefits is made. When you are ready to retire, transferring these plans is done in the same way, regardless of the type of pension.
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Instructions
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Call your pension benefit office. Typically, this will be part of the human resources department at your workplace. Tell the staff you would like to transfer your pension from the company. Human resources will give you forms to fill out to receive your money as a lump sum instead of the pension payment options.
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Fill out the forms to receive a distribution as a lump sum of money. You can transfer your money directly to an Individual Retirement Account, or you have the option to receive the funds as a check. If you receive the money as a check, you must deposit the money into a retirement account within 60 days or you will pay income tax on all of the money in your retirement account. If you are retiring early, and you are younger than 59 1/2, you will also pay a 10 percent penalty on your retirement funds.
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Fill out the paperwork for the new retirement account with a brokerage of your choosing. Direct your pension administrator to send the funds to the new brokerage. If you received the money as a check, deposit the funds into your bank account and then write a check from your bank account to your new retirement account within 60 days of the date your pension funds were issued to you.
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References
- "Beacon Capital Management Advisers": IRA Rollover Rules
- "Practicing Financial Planning for Professionals, Practitioner's 10th edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004
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