new Roth Ira Prospect

[Guest jojo42]

Hi, My Wife is about to lose her job due to her Norway based Company moving its operation to China and The Dominican Republic. She will be receiving no severance pay for her 22 years of service but will be receiving her Pension benefits in a lump sum Settlement (POSSIBLY). How can she go about openning a Roth IRA and how much of her Pension Settlement can she roll over.

[John G]

You are using some generic terms and the devil is in the details. First, you will not be able to roll over any funds directly into a Roth but you may have the option to move some or all of funds into a regular IRA. You options will be greatly determined by the source of the funds. There are a lot a specific circumstances and details that a local accountant or tax professional needs to examine.

If he/she determines that you can roll any funds into an IRA, then you may subsequently "convert" some or all of those funds to a Roth. Understanding the possible benefits and knowing the proper procedures of a "conversion" you should also consult your accountant or tax professional.

I would also suggest that you spend 1 hour with a lawyer to see if you have any other rights regarding your wifes change in employement.

[Guest jojo42]

Did not mean to use the devil but ment to show anger for my wife losing her job. Sorry!

Thank you Dave for your prompt response. My wife is fearful of penalties and taxes due to early withdrawal of her pension moneys.

As for generic terms, everything is still up in the air and she doesn't know what to do. As soon as I get more definative answers we will let someone know. It was suggested that we go the Roth IRA route. That is why we contacted you.

Again thank you for your prompt response.

Sincerely,

Joe Gagliano

[John G]

"The devil is in the details" is an old expression that I used without noticing the symbol you had choosen. It means that bad results can come from the small details of a proposal. In this case, I mean that you can make some major mistakes by misunderstanding the details. For example, there can be big differences between rules for Roths and regular IRAs. There are also differences between types of pension plans. Making a mistake, even a well intentioned one, is not difficult and you need professional advice. You do not want to needlessly incur taxes or penalties because of some obscure regulation.

If your wife finds another job, she may have more options with any retirement plan at that location.

Please get some professional tax advice. Accountants see these kinds of issues frequently.... you hopefully go through it just this one time.

I suggested getting legal advice to see if you wife has any rights with regard to her long service. Sometimes you don't have a right, but you might have some leverage with the firm where if you make a reasonable request it might be honored. Terminations often leave room for negotiating the specifics, especially if mgmt is feeling badly about the riff or relocation. I helped a women in Colorado secure an extra 3 months of work and a full year of medical benefits at a relocating companies expense. She just made a formal counter proposal by letter and they acceded.