If anyone can help me with this, I would appreciate it.
I turn 55 this year, and I become eligible on my birthday to get a lump sum retirement payment from my former employer. It will be around $90K. I will take it now because I'm afraid if I wait until I'm 59, they might change the rules, or stop paying altogether, as some other companies have done.
I quit working several years ago with about $300K in my (regular) IRA. With a little luck in the stock market, that's now around $500K, divided among several accounts. No taxes yet, since it's an IRA. I have been living on my savings, supplemented by withdrawals from my IRA. I don't have to pay early withdrawal penalties because I'm taking "substantially equal" annual amounts from a couple of the smaller accounts, according to the minimum withdrawal formula in the IRA pub (basically balance/life expectancy). I haven't had to file a return because my IRA plus my savings interest comes to less than the minimum income needed to file (now about $8K per year). Since I am single, my house is paid off, and I live frugally, I can actually live quite comfortably on about $10K/year.
Since I didn't owe any tax last year, I gather that there will be no penalty for not filing estimated taxes if I take the $90K as income this year. However, I also gather that I will be taxed at the top rate, plus a penalty for taking the payment before age 59-1/2.
So, my questions:
- Can I have this payment sent to an existing IRA account and avoid taxes on it altogether?
- Is there any way to take the payment as regular income, and income- average over past or future years to lower my tax rate?
- If I take this payment as regular income, and pay the 10% penalty for early distribution, will it also trigger penalties in my existing IRAs that I have been withdrawing money from?
- I don't know much about Roth IRAs. Would there be a way to get this into one without a big tax bite?
Thanks for any help, and especially for references to specific pages of IRS publications.