you're listening to Ramsey every day millionaires or we talk retirement building wealth and outrageous generosity

Susan is with us in Portland Maine. Hi Susan welcome to the Ramsey show. Hi Dave, good afternoon. So I have a rather

uninformed question so I apologize for my lack of information but I'm calling about a lump

thumb pension distribution from my husband's employer. So the amount of the distribution, well we're both 65.

We were both playing on working for probably another two years but he's been talking with

people and he's working with our retiring this year and who are planning to retire in 2023 and I have a

question about the withholding that the employer is I believe required to withhold from your

distribution is that correct? Well there's two options on that one is if you actually take the

distribution in cash and bring it home put in your checking account they are required to withhold

20% and it will be taxed on your actual tax rate which will probably be more than 20% what's the

lump sum how much is it? Well the lump sum from the pension is $475,000 that's it's value right now

okay I don't think it's going to go up a lot okay so here's what you want to do instead of that

you want to go to your smart vestor pro your your investment advisor and to a direct transfer

rollover of the lump sum distribution into an IRA and mutual funds because you don't need $400,000

in your checking account right? No and there's no reason for you to pay there's no reason for

your taxes on it right now and so I would roll it all to an IRA and mutual funds that you sit

down with your smart vestor pro and pick and there's no taxes withheld and no taxes do when you do

that and so their their time has been that there is a 20% withholding there is if he takes it home

but he there is a 20% withholding and the taxes will be greater than that because you're you're

going to have a $400,000 income that year so you're going to have a 40% tax 39.2 okay so

um you're going to get hammered so but they are not required to do that if you do a direct transfer

rollover they are required not to touch it as a matter of fact okay okay and then there's no

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