you really need the services of a financial planner because in some ways were working in the dark as to what is best. if you take a lump sum, the taxable portion adds to your ordinary income and is taxed. you may be able to use 10-year averaging on a lump sum distribution. use part I of form 4872 to see if you qualify.
https://www.irs.gov/pub/irs-pdf/f4972.pdf or you can roll it into an IRA tax free and RMD distributions would have to start based on current law by 4/1 of the year following the year you turn 72 (age 72 distribution). if you do this rather than taking a distribution in the year you turn 72 you would also have to take a second RMD distribution before the end of the year (age 73 distribution). there afeter an RMD each year. a direct rollover (trustee to trustee) is best because there is no withholding. if you got the money, you have 60 days to put it into an IRA. miss the deadline and your taxed on the entire taxable amount. if taxes are withheld and you don't make it up with personal funds then the withholding is treated as a taxable distribution. rolling into a ROTH IRA would make the entire taxable portion of the distribution taxable. or you can take your employers offer of an annuity. IRC 417 is only for purposes of determining the minimum amount of a survivor annuity for a defined benefit pension plan when there's an election to waive a qualified joint and survivor annuity. the value of your account is based on the plan documents so the "minimum could be higher". the human resource department of your employer or Fidelity can tell you the value. we can't just too much info were missing.
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A QJSA is when retirement benefits are paid as a life annuity (a series of payments, usually monthly, for life) to the participant and a survivor annuity over the life of the participant’s surviving spouse (or a former spouse, child or dependent who must be treated as a surviving spouse under a QDRO) following the participant’s death.
The amount paid to the surviving spouse must be no less than 50% and no greater than 100% of the amount of the annuity paid during the participant’s life. Alternatively, a participant who waives a QJSA may elect to have a qualified optional survivor annuity (QOSA). The amount paid to the surviving spouse under a QOSA is equal to the certain percentage (as chosen) of the amount of the annuity payable during the participant’s life.
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- I believe there are other considerations
- A stream of payments (or annuity) is considered low risk in that the payments are assumed to be made. maybe maybe not. see above
- Inflation will reduce the value of a stream of payments over time. of course
- Putting inflation aside, a long lived beneficiary will receive a greater benefit than a short lived beneficiary of the same or equivalent annuity. for a QJSA yes, but that does not take into account what the survivor may receive, and should the "survivor" predecease the participant ????????????
- However the lump sum discount rate is determined, a higher interest or discount rate will result in a lower lump sum. YES.
- Are the above correct?
- Other than taxes, is there more to be considered? many. what do you want to do with the money, your ages and life expectancy. your health.
we know nothing about your finances. you are just looking at what appears to be a small piece. using a financial planner is advisable especially if you have a substantial net worth.
