Give those dollars the opportunity for further tax-deferred growth.

A big payout leads to a big question.  If you are taking a lump sum pension payout from Phillips 66 (If offered by your company), what is the next step for that money? It will be integral to your retirement; how can you make it work harder for you?

Rolling it over might be the right thing to do.  If you don’t have substantial retirement savings, your Phillips 66 lump sum option (If offered by your company) may be just what you need. The key is to plan to keep it growing.That money shouldn’t just sit there.

Even tame inflation whittles away at the value of money over time. Most corporate pension payments aren’t inflation-indexed, so those monthly payments eventually purchase less and less. Lump sums are just as susceptible: if you receive $100,000 today, that $100,000 will buy 50% less by 2028 assuming consistent 3% inflation (and that is quite an optimistic assumption).

Putting it in the bank might cause you some financial pain.  If you take your Phillips 66 lump sum payout (If offered by your company) and deposit it, all that money will be considered taxable income by the IRS. (There are very few exceptions to that rule.) Moreover, you won’t get the whole amount that way: per IRS regulations, your employer must withhold 20% of it.

Don’t you want to postpone paying taxes on those assets?  If you transfer the lump-sum distribution into a traditional IRA, you can postpone paying taxes on those funds. It's possible to delay paying taxes on a distribution that has already been paid to you by rolling over the taxable portion to an IRA within 60 days of receiving the payment.

In doing so, you are keeping those assets in a tax-deferred account. They can be invested as you like, and that money will not be taxed until it is withdrawn. (You may only transfer a lump sum distribution from a company pension plan into a traditional IRA – you may not transfer it to a Roth IRA.)

If you are considering taking a lump sum payout, make sure you position that money for additional tax-deferred growth. Talk to a financial professional who can help you with the paperwork and get your IRA rollover going.

Citations.

1 - money.cnn.com/2012/09/01/pf/expert/pension-payments.moneymag/index.html [9/1/12]

2 - www.kiplinger.com/article/retirement/T037-C000-S002-pensions-take-a-lump-sum-or-not.html [9/11]

3 - www.irs.gov/taxtopics/tc412.html [1/4/13]

4 - www.fool.com/retirement/manageretirement/manageretirement2.htm [1/21/13]

Before finalizing any estate plan, it is worth examining how Phillips 66's employer-sponsored benefits fit into the broader picture. According to publicly available information, Phillips 66 maintains a cash balance pension plan, which defines your retirement benefit as a hypothetical account balance that grows over your career through pay credits and interest credits. Under ERISA, cash balance plan benefits vest on a three-year cliff schedule. Phillips 66 also offers retiree healthcare benefits to eligible employees. Because the specifics of your cash balance account balance, vesting status, and benefit options depend on your individual employment history and plan documents, We encourage you to review your Summary Plan Description (SPD) or speak with Phillips 66's HR or benefits team for the most current details.