How Can I Get My Pension Early If My Company Is Being Sold?

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If your company is for sale or selling, it fortunately won't affect your pension plan. Nonetheless, you may want to cash out your pension at this time -- although you may have limited options, depending on the type of pension you have. You should understand the basics and how this might affect your ability to cash out your savings.

Type

Many types of pensions are available to you. Your pension plan might be a structured benefit like a 412i plan or a 457 plan. Your plan could also be more of a 401k plan funded entirely by your employer. Alternatively, your pension could be a Simplified Employee Pension, or SEP, individual retirement account. Each of these offers you a way to cash out early, but some of these pension come with penalties for doing so.

Significance

When another company buys out your company, the new organization may change custodians or even the terms of the pension plan itself. This is your opportunity to cash out your pension or roll it over. You must request an in-service withdrawal from your pension plan administrator. If your plan allows this type of transfer, you can move your pension savings to an individual retirement account, or IRA, outside your company.

Benefit

Even if your plan does not allow for in-service withdrawals, you may withdraw money from the plan using a withdrawal exception under Internal Revenue Service, or IRS, rule 72t. This withdrawal exception allows regular monthly payments to you without an IRS penalty. You pay income tax on the distribution, however. This is not the same as cashing out your pension plan, but you do get your money. You must take equal and substantial payments based on your life expectancy at the time of your withdrawal and these payments must continue for at least five years or until your age 59 and 6 months.

Consideration

You should keep a private savings in addition to your employer's pension. This ensures that you won't have to worry about future corporate takeovers or changing jobs. Additionally, a private savings gives you more control over the money you set aside for your future retirement. You get to choose the investments as well as the contribution levels.

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