How do I model a Pension Lump Sum Payout?

inStream provides you a couple options to model a lump sum pension payout in your client's plan.

Using Income to Model a Lump Sump Pension Payout

Typically, any pension paid to your client is treated as earned income and is liable to income tax.  If the pension lump sum payout is taxable, follow the steps below:

  1. Enter Income in your client' profile with the same Start Year and End Year.
  2. Customize the tax structure for the lump sum payout through the Income option (Ordinary, Untaxed, Long-Term Capital Gain, Short Term Capital Gain, Interest Income, Untaxed Interest Income). This lump sum payout will be allocated to your taxable accounts.

 If your payout is non-taxable you can use the Tax Classification to change the status to 100% untaxed.

Using Contributions to Model a Pension Lump Sum Payout

In some cases, such as when you roll the lump sum into an IRA, the pension lump sum payout is not taxed immediately. If the pension lump sum payout is not taxed, you can enter this lump sum payout as a Contribution to a designated account.

  1. Go to Accounts
  2. Select an existing account you want to contribute the funds to OR create a new account.  A new account will have a $0 current market value.
  3. In the Account plan card, click "Add another contribution"
  4. Enter the lump sum value of the contribution in the year it is expected to occur.


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