Avoid the Pension Payout Trap
Sadly, some retirees fall into the pension payout trap. In other words, if you get your payments from a company plan, you should be aware of the pension-payout trap. Taking advantage of such a distribution, the company is actually required by law to withhold a flat 20 percent for Uncle Sam.
This happens even when you roll over the sum of money into an IRA account. In fact, the taxman will hold onto the 20 percent until you file a tax return to get a refund. But the worst part comes when you have to roll over 100 percent of the sum when Uncle Sam is actually holding onto the 20 percent of it…
Luckily, you can avoid this pension payout trap if you just ask your employer to send the sum of money directly to a rollover IRA. So, if the check is actually made out to your IRA account and not to you directly, there’s virtually no withholding.
