Pension Lump Sum to Gold IRA: What to Know

Some pension plans give retirees a choice: monthly payments for life, or a single lump sum. People who like the idea of holding metals sometimes ask whether that lump sum can go into a Gold IRA. This page covers what the IRS and other public agencies say about the rollover and the trade-off. It is part of our Gold IRA rollover guide.

This page explains rules. It does not say whether you should take a lump sum or buy metals with it. That decision depends on your situation, so talk with a qualified financial adviser or tax professional.

Can a pension lump sum be rolled into a Gold IRA?

Often, yes, if your plan offers a lump sum. The IRS says that "Most pre-retirement payments you receive from a retirement plan or IRA can be 'rolled over,'" and that "You can roll your money into almost any type of retirement plan or IRA" (IRS). The same page says certain payments cannot be rolled over, including required minimum distributions, hardship distributions and "a distribution that is one of a series of substantially equal payments."

The IRS rollover page we opened does not discuss pension plans as a separate category, so it does not say which pension plans must offer a lump sum. PBGC, the federal agency that insures many private pensions, says "Some pension plans allow you to take part of your benefit as a lump sum and part of it as an annuity" and tells readers to check with the plan administrator (PBGC). Whether you have a lump-sum option is a plan question.

A "Gold IRA" is an IRA that holds precious metals, so the receiving account is an IRA like any other. The metal rules apply once money is invested: the IRS lists "Any metal or gem" and "Any stamp or coin" as collectibles, with limited exceptions for certain gold, silver and platinum coins, state-issued coins, and bullion of a certain fineness held by a bank or approved non-bank trustee, and says the restrictions "also apply to IRAs" (IRS). See our collectibles rule guide.

What do you give up with a lump sum?

PBGC describes the two choices this way: "Choose between lifetime income (annuity) or a one-time lump sum." It calls the annuity "Guaranteed Monthly Payments for life" and the lump sum a "One-time payment" (PBGC).

PBGC also says: "After the date of your first payment, you cannot change your selection."

The CFPB guide is an archived item from January 12, 2016, and the agency's page notes the information may be outdated. Check current rules with the plan and PBGC. The CFPB also wrote that the lump sum "is generally treated as ordinary income for that year" and that rolling it into a qualified account can defer income taxes.

Putting a lump sum into metals adds another layer: after the rollover, the value depends on the IRA's investments, fees and prices, not on a formula in the pension plan. We do not predict metal prices. Our Gold IRA pros and cons guide covers the risks and costs.

How do the tax rules work for the rollover?

The IRS gives two paths.

1. Direct rollover. The plan sends the money straight to the IRA. The IRS says "No taxes will be withheld from your transfer amount."
2. Payment to you. "A retirement plan distribution paid to you is subject to mandatory withholding of 20%, even if you intend to roll it over later." You then have "60 days from the date you receive" the money to roll it over (IRS).

Topic 410 repeats the withholding rule for eligible rollover distributions: "You can avoid this withholding by choosing the direct rollover option," and a check payable to the receiving plan or IRA "isn't subject to withholding" (IRS Topic 410). Topic 410 also says pension payments are partly taxable if you contributed after-tax dollars to the plan, and it points readers to Topic 412 for lump-sum treatment. See our guides to direct vs indirect rollovers and the 60-day rule.

If any of your pension came from after-tax contributions, see our guide to after-tax 401(k) money for how the IRS splits pretax and after-tax amounts in a rollover. That guide is about 401(k) plans; we did not verify that every pension plan follows the same mechanics, so ask the plan.

What are common mistakes?

• Taking the check personally and facing 20% withholding when a direct rollover was possible.
• Assuming the lump sum is available. The plan decides.
• Choosing without checking whether the choice can be changed. PBGC says that after the date of the first payment, the selection cannot be changed.
• Rolling over a payment that cannot be rolled over, such as a required minimum distribution.
• Treating the decision as a metals question only. The loss of guaranteed monthly income is a separate trade-off.

Related questions

What if I am still working? See our in-service rollover guide.

Are federal employees different? See our TSP to Gold IRA guide.

This page is general information. A tax professional or financial adviser can review your plan's lump-sum offer with you.