Cash Balance Withdrawal

[vallieone]

Just found this site by accident and have been pouring over the messages and getting more confused as I go.

I am a novice and apologize if this question has been answered before.

I am 54 and expect to retire at 55 and will break service completely with my firm. I have a 401K and cash balance pension plan. From the boards and other websites it looks like I can withdraw from my 401K plan without any penalty hopefully that is correct. I plan to leave it with my firm and not touch it untill I am 59 1/2. I have after tax and pre-tax dollars in there.

Its my cash balance plan that I am confused about. I can take it either as a lump sum or as an annuity. I want to take it as a lump sum but need the money to live on. If I take the annuity route does the SEPPS issue come into play? If I take it as a lump sum do I have to move it to an IRA and do I have to do the SEPPS calculation even though I will be 55 and have broken service?

I am conservative and could I use the Vanguard TIPS fund for the IRA?

Thanks for you help!!

[ats5g]

Vallieone,

You should check your 401(k)'s Summary Plan Description (SPD) for rules governing withdrawing money. Each plan usually has its own quirks. If you're still confused, call the company that administers the plan. You may want to do this anyway, just to double check.

In your cash balance plan, I think any SEPP issues should not affect taking the money as an annuity. Again, read the SPD for the pension plan. Each plan is different. I think SEPP only applies to withdrawals from IRAs (but I could be wrong).

If you want to take the pension money as a lump sum, and you can take withdrawals penalty free from the 401(k), why not avoid having to deal w/ the SEPP, take withdrawals from the 401(k), and either let the cash balance grow in the pension plan or roll it over into an IRA and wait until 59 1/2 to take withdrawals?

- Alec

[vallieone]

Alec:

Thanks I will contact my Plan Administrator concerning the SPD's