How is a lump sum pension payout taxed?
Photo Credit: Courtesy of 3DStockPhoto (lump sum image)
You'll owe federal income taxes on every monthly pension payment. But with a lump sum, you don't have to pay the tax man if you don't need the money. If you roll the lump sum into an IRA, you'll only be taxed on the money that you choose to take out each month.