Can proceeds from a Lump Sum Pension be Used to Fund an IRA?

[Bonny]

I posted about my Dad's situation on YM

notmsnmoney.proboards.com/thread/39770/managing-little-windfall-social-benefits

One suggestion for his situation is to take the proceeds from this nearly $16k lump sum pension payment and fund an IRA. Is this a possibility?

Since he's 78 of course he'll need to take RMDs but we may be able to manage those payment to keep him under a certain income threshold to maintain his eligibility in some social programs. 

Thanks for your help,

Bonny

[TheOtherMe]

For a traditional IRA, a person can not be over age 70 1/2.  For a Roth, age makes no difference.

He would have to have earned income to fund a Roth.

See page 23 of Publication 590 to see if he could roll the pension over.  It depends on the type of pension he has if it can be rolled over.

I will let somebody else chime in as I am not an expert on pensions and IRAs and strategy.  

[Ombud]

That wouldn't help him remain eligible for Medi-Cal as all the money would be accessible

[mwcpa]

here is some help.... but a lot more facts are needed here and it is probably a little more difficult to answer and give general answers here, a local pro may be best to ask who would have knowledge of all of Dad's facts and circumstances.

www.irs.gov/taxtopics/tc412.html

[Bonny]

Jun 9, 2014 5:05:02 GMT -5 mwcpa said:

here is some help.... but a lot more facts are needed here and it is probably a little more difficult to answer and give general answers here, a local pro may be best to ask who would have knowledge of all of Dad's facts and circumstances.

www.irs.gov/taxtopics/tc412.html

Thanks MWCPA. It doesn't look like topic 412 works for him. His birthday is 2/27/36 and the $16,000 is a partial lump sum; it's actually the back payments the company should have paid him for the time he was eligible 14 years ago. In addition he is to be paid $100/mth (and COLA) for the rest of his life. I don't know if there is a complete lump sum option. But 412 does make some references to some other rollover options which I should help him explore.

And as Ombud points out it's quite the tightrope walk beyond the tax issue; balancing this little windfall with his eligibility for social services, especially the medical benefits he's currently getting.