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I am 55 and want to retire next year. Can I receive my pension benefits then or do I have to wait until I am 65?
It depends on the provisions in your plan. If your plan is a defined benefit plan, you may not be able to start receiving benefits until age 65. If you worked for a government entity, for example, as a school teacher, the age at which you can start receiving retirement benefits may be set by government law or regulation.
Many plans, however, provide for payment of pension benefits at an earlier age than 65 (although they frequently reduce the amount of the monthly benefit to reflect the fact that you would start receiving the benefits sooner). Your plan may also give you the option of taking a lump sum instead of monthly payments, which would allow you to invest that sum as you chose. The downside of a lump sum payment might be that you would lose some benefits, such as health coverage, if you opt out of the ongoing pension plan. Make sure you know all the effects of your decision before you make it.
Even if you are able to take early retirement, it often pays to consult a tax lawyer and a highly qualified financial advisor to assess all the implications of early retirement. For example, if a lump sum retirement benefit is not paid directly into an IRA, you could get hit with a 20% withholding tax, so it is well worth your while to get competent advice on how to handle things properly. |
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