Dollars & Sense - 60 Day Rollover

Distributions from qualified plans generally constitute ordinary income to the recipient when received. When an individual voluntarily affects a rollover of pension monies from one qualified plan account to another he or she is normally aware that the transfer must take place within 60 days of receiving the check. Some companies when an employee is terminated or retires will do a direct transfer for the employee to an IRA account. If the employee’s distribution isn’t handled in one of these two ways, the entire distributed amount will be subject to ordinary income taxes in the year distributed. For some, this could mean a distribution of $100,000 or more. Large distributions that aren’t rolled over within 60 days could quickly thrust an employee in the top Federal income tax bracket and State income tax brackets. If the employee is under 59 1/2 years of age there’s also a 10% IRS early withdrawal penalty. That means the employee is only left with less than half of each pension dollar received. Constructive receipt of a pension distribution is determined by when it lands in the hands of the employee, not when the check gets cashed. If you anticipate retiring or changing jobs and are eligible to receive a pension plan distribution be sure you work with a financial planner so the process gets done correctly and isn’t subjected to income taxes. Your retirement dollars are too precious to inadvertently have them go to pet projects of politicians in Sacramento or Washington.

« Back to Dollars & Sense

Paso Robles
Branch Office

544 12th Street
Paso Robles, CA 93446

805/239/4388

San Luis Obispo
Corporate Office

1101 Marsh Street
San Luis Obispo, CA 93401

805/543/4366

Santa Maria
Branch Office

1157 E. Clark Avenue, Suite H
Santa Maria, CA 93455

805/937/6321