I will assume this is a true pension and you are already receiving monthly checks. There is no way to roll this over into another tax deferred account in order to avoid these payments being current taxable income.

You may contribute these payments to a non-qualified income tax deferred annuity. However, you will be contributing after-tax dollars and not avoiding current taxation of the pension payments. Doing this would be less efficient over the long term than investing in a tax efficient investment portfolio.

We are apparently heading into a time of higher income taxes so deferring income taxes may not be a good idea since when the income is taken it will be taxed at ordinary income tax rates. It would be better to be paying long term capital gains instead, even though the rates will undoubtedly going up as well. They will, presumably, continue to have more favorable treatment than ordinary income.

Hi TerryB,
Perhaps you can clarify a few things for us. First, are you receiving monthly paychecks (or pension payments) already? Or is this monthly pension you mention really a retirement account such as a 401k that is still with the employer?

If it is a true pension and you are already receiving monthly payments, read Michael Kitces' response.

If this is something other than a monthly pension, you may have other options. It just depends on what further details you provide to this forum.

Thanks,

Jim

Terry,

I can't add much that Michael Kitces hasn't addressed, but I would recommend you not purchase an annuity with the proceeds of the pension. The tax savings from this maneuver probably would not outweigh the costs associated with the products, especially if you buy from a broker or life insurance rep. You can create a tax efficient portfolio with municipal bonds, index funds and Exchange Traded Funds.

Best,

Kirk

Yes, you can roll your pension over to a tax deferred annuity (through a custodian to custodian transfer) without a tax penalty. But, it would very wise for you not hire a financial planner or insurance agent. They may seem sincere, but they are only looking out for their best interests (not yours). Ask yourself did the financial planner who advised a deferred annuity recommend a product (such as an EIA)??? 99% of these so-called financial planners will recommend these products, because of the high commission of 6 to 8 percent. Yet these products were designed for bull markets. This means your return will likely be a zero percent until the deferal period is over (which will be 5 years). Your focus is not to invest in an aset-liability which gives you a negative return, a zero return, or a low yield. And don't get me wrong, there are a class of deferred fixed annuites in your best interests (if you are conservative)--and that is CD fixed annuity. But the agent will not pitch that product, since it has a very low commission structure.

In addition, you hiring a stock broker to purchase securities will likley result in you losing a greater portion of your hard earned retirement do to two reasons; one, they will likely vear you into a class of securities called open-ended mutual funds (which a majority of these products do very poorly), but they will pitch you anyway so they can produce the high commission. Two, if the stock broker spends 80% of his time marketing for new clients, his old clients will die on the vine do to neglict. Your best bet is to get an online brokerage account and follow an object of high divdend payout securities (not bonds). And just remember to eliminate any security that has a negative return, a zero return, or a low yield. Keep it simple and remain in control at all times of your money.

Yes if it's not a qualified account. That means you can add money to any account like an annuity as long as it's not an IRA. I am assuming you have no other income to report. You can only contibute to an IRA if you have earned income and a pension is not considered earned income

Hi Terry,

As Peter Said, Yes you can. He discouraged you from going through a financial planner or broker etc. There is an exception to this. If the planner/consultant's engagement relationship with you is one of FIDUCIARY. Fiduciaries are by definition put the client's interests first. Planner's/Consultant's that are Fiduciaries are in the minority but they are out there to be found.
I'm not telling you this to sell you. But I'm one of them. I would also look for someone similar to myself that is a FEE-ONLY advisor. And an advisor that is either a Certified Financial Planner or at least adheres to the CFP board's Standard of Conduct, Practice and Ethics as I am currently working on the CFP. Another exception might be, if you have any relatives or close friends that are advisors that you trust. If someone was my close friend, I would not charg them and I would still put their interests ahead of mine. I am certain that there are plenty of other very qualified advisos out there that are near you that you could turn to for advise on this question and others not to mention a comprehensive plan.

Best Regards,
Doug

Terryb,
Once your monthly pension payments begin from an employer retirement plan, they are generally not eligible to be rolled over into another IRA. Some pension plans will allow you to wait before you begin the payments, and/or may allow you to roll over the lump sum pension balance to an IRA.

But once the monthly payments begin as a pension, they are generally considered to be permanently distributed, with the associated income tax consequences.

I hope that helps to clarify a little!