An unused pension plan
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June 27, 2000: 10:26 a.m. ET
Before you decide to roll over the money, make sure you have access to it
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NEW YORK (CNNfn) - Unused money in a pension plan may seem ripe for reinvestment, but what are the potential consequences for such a move?
In response to a reader's question, Frank Armstrong, a certified financial planner and president of Managed Account Services, suggested that you find out what kind of distribution the plan offers before you can decide on an investment strategy.
Ask the experts a question
I have some pension money at a previous job but I don't know if I should roll it over into an IRA, or if that's even possible. What should I do?
Your question has two parts: Can you get the money; and is it a good idea.
As far as the first question of whether you can get the money, ask the plan administrator or human resources department of your former employer what the policy is. It varies from plan to plan and employer to employer.
It would be unusual for a defined benefit plan to make a lump sum distribution of a vested interest before retirement date. Many won't make lump sum distributions, even at the retirement date.
The assumed payout is an annuity. It would be unusual for a defined contribution plan or 401(k) to refuse to make a distribution to a separated employee. But, there are exceptions to both cases.
You will also have a few factors to consider whether or not it's a good idea to take the money out. It may be a good idea to leave funds in an employer's pension plan if costs are low and the investment policy suits your needs.
On the other hand, in some cases you may find that you can actually save money by transferring to an IRA at a discount brokerage and investing for yourself.
And, if the investment choices are too limited where you are, you may be well served to move to obtain flexibility to carry out your investment strategy.
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