I’m About to Take My Pension — What Should I Do Before That?
- carmenh73
- 26 minutes ago
- 2 min read
If you’re close to retirement and have a pension or 401(k), there’s one decision that matters more than almost any other — when and how you take your money.
Here’s the part most people don’t realize until it’s too late:requesting your pension or 401(k) as a lump sum can be a mistake. Once the money is released, taxes are triggered, deadlines begin, and your options can shrink fast.
That’s why the most important step isn’t choosing a product. It’s talking to an expert before you request a single dollar.
The Costly Mistake We See All the Time
Many people assume they can “just take the lump sum” and figure it out later. Unfortunately, that one step can create a tax problem that can’t be fixed.
In most cases:
The IRS automatically withholds 20% for federal taxes
You may owe more depending on your tax bracket
If you miss key deadlines, penalties can apply
For example:If you had $300,000 in a 401(k) and requested a lump sum, you might only receive $240,000. That remaining $60,000 goes straight to the IRS.
If that money isn’t handled correctly within 60 days, that loss becomes permanent.
This is why we stress this so strongly: the time to plan is before the money moves, not after.
The 60-Day Window That Changes Everything
If funds are paid directly to you, you typically have 60 days to roll them into an IRA or another qualified account.
Miss that window and:
The distribution becomes fully taxable
You may owe additional taxes beyond the 20% already withheld
If you’re under 59½, a 10% penalty could apply
Once that happens, there’s often nothing anyone can do to reverse it.
A simple conversation ahead of time can prevent years of unnecessary tax regret.
Why Talking to an Expert First Before Taking Your Pension Matters
Before requesting your pension or retirement funds, an expert can help you:
Decide whether a lump sum even makes sense
Structure a rollover properly to avoid triggering taxes
Explore income strategies that replace a paycheck
Balance guaranteed income, growth, and liquidity
This planning happens before forms are signed — not after.
Turning Retirement Savings Into Reliable Income
For many retirees, part of the plan may include turning a portion of their savings into predictable income through strategies like annuities.
The goal isn’t complexity — it’s clarity:
Knowing your bills are covered
Knowing how long your income will last
Knowing your spouse is protected
These decisions only work when they’re made before money is withdrawn.
The Bottom Line
If you’re approaching retirement, don’t rush to take the lump sum — even if it feels like the natural next step.
Pause. Ask questions. Talk to an expert first.
At Penny Lane Financial, we specialize in helping people before retirement decisions become permanent. We’re here to walk through your options, explain the tradeoffs, and help you move forward with confidence — without pressure.
The best retirement plans start with a conversation, not a withdrawal.