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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: Stockman_77079 who wrote (5117)	5/4/1999 12:20:00 PM
From: Arrow Hd.	Read Replies (1) \| Respond to of 8218

It may be a bit more complicated depending upon what you do. If you take the lump sum option and when you leave either by retiring or moving to another company to protect against immediate taxation you will have to roll it over to a 401K or an IRA (maybe some other options but these are the most common) or else you will pay capital gains tax for the year in which you receive the lump sum. By rolling into the 401K or IRA you defer the tax and then pay tax when you actually start to withdraw the money. Here is the rub. Under the current IBM retirement plan a person can retire at 55 or at 30 years with a full retirement benefit receiving a monthly payment immediately with retirement medical coverage. The retiree pays tax on this income. If the same 55/30 employee retires and takes the lump sum then that person pays tax immediately on the lump amount having less principle to throw off a monthly payment so the lump amount would have to be very large and I doubt that when the IBM employees with 25 or more years see the lump sum amount they will opt for this deal. If the 55/30 retiree takes the lump sum and rolls it into a 401K or IRA then they protect the principle from taxation but cant draw on it until 59 1/2 without incurring a penalty. Also, from what I have seen discussed the lump sum approach references retiring at 65 so I would expect that the cross over between the lump sum option and the standard retirement option is at 65 which means those who still can get the old deal with full retirement at 55/30 will have an entire 10 year window of retirement checks which means the lump sum option could never catch up. So, without seeing any details, my humble and uneducated guess is that if you have more than 25 years or are within one of the windows allowing for the option of taking the standard retirement package with monthly payments and retiree medical packages then that is what is going to be the best deal.