My husband, who is 39, is having his union pension released to him in the next few weeks, though it's not his choice. He left the union and has about $130,000 in the account that will be given to him. He will be taking about $50,000 out. What is the best way to start the retirement process again with the rest of the money?
FPA member Dick Hemingway, CLU, ChFC, CFP®, MSFS, a financial advisor with Boulay Financial Advisors, LLC, suggested that you get guidance on the tax consequences of your husband's distribution from the union pension plan. "If you are unsure, I suggest contacting a Certified Public Accountant since distributions from qualified retirement plans are usually income taxable and subject to a 10 percent Internal Revenue Service (IRS) penalty at your husband's age if not transferred to another qualified plan, such as an Individual Retirement Account (IRA), within 60 days of receipt," Hemingway said. "Union regulations may provide for a different consequence."
In addition, he suggested that you interview a few financial planners or ask friends and acquaintances for referrals. "Following an initial meeting to determine methodology, cost and rapport, the planner will ask questions to understand your objectives, risk tolerance and other resources," Hemingway said. "This will enable him/her to make recommendations for the investment of your husband's pension dollars."
FPA member Andrea Eaton, CFP®, a financial planner at Cornerstone Wealth Advisors, suggested that open up a Rollover IRA at a custodian of your choosing. "Ask the sponsor of the pension plan how to 'rollover' the balance of the pension to a Rollover IRA," she said. "Your husband will likely have to fill out a form. By rolling over the pension plan to an IRA, you will continue to defer the taxation on the balance."