200K Pension Awarded

[alexabreana]

Just got divorce and got awarded Ex-pension in the amount of 200K
I am 50 year old, not sure if I should leave the money in his pension account (Not 401K), transfer to my Vanguard Roth IRA, take a lump sum,  not sure how taxes will play out, any advice would be greatly appreciated.

[reeshau]

You say pension.  Do you mean a 401k, or a defined benefit pension? (i.e. one that will pay a certain amount per month at a specific retirement age)

In either case, I would still roll it over to an IRA:  the company could change its policies at any time, and since you aren't an employee, you may get late notice because you don't have access to regular company communications.  You may miss deadlines for action, or have to make critical decisions in short order.

In the case of a defined-benefit pension, if the pension plan defaulted, you would be put in the gentle hands of the PBGC.  Your fate would be out of your control, irrevocably.

So, especially if it's a defined-benefit plan, but really in wither case, roll it over.  Then it is fully yours, with the standard selection of low-cost, public index funds.  You don't need anything more complicated than that, and you won't have to regularly be in touch with an organization that may bring up thoughts of your ex.

[DaMa]

If you can, roll it into a traditional IRA in your own name.  There would be no tax payable now -- you pay when you take distributions after retirement.  If you rolled it into a Roth IRA, you would have to pay normal income tax now.

[Loren Ver]

When my company did complicated company things they gave me an option to take out my pension.  Awesome!

Mine was a lot smaller than yours but I rolled mine into an IRA.  I did this for several reason:
1.  It got it away from a company I would soon be FIREing from and wanted direct control over the funds (or at least control through vanguard).  I wouldn't have to rely on the company not doing something bad (ENRON), having communication issues (it was merging and changing names), or anything else until I hit their designated retirement age (I retired in my 30s).

2. There would be no tax implication until I took the money out and they could be mitigated.

3.  I could choose the investments.  The Pension was set to a percent above a bond amount and this didn't align with my goals, it was geared for people that were going to work for 40 years and make decent money.

4. IRAs give me other money strategies (Roth ladders, setting beneficiaries) if I so desire, therefore controlling more of my fate and the fate of all my future money.

Pensions do have their own benefits, but you would have to consult their documentations to find them:
For example they are usually a set amount of growth per year, if you have a lot of fear, that's not a bad thing. 

Loren

[alexabreana]

Thank you, did you roll into a traditional IRA?

[Duke03]

Even though you were awarded the money in a divorce you might not be able to access it for some time.  Every pension is different.  They might not release any money to you at all until your ex-spouse decides to retire and draw his own pension.  They also may have rules against cashing you out and instead will only pay you a small monthly amount when it is time for you to start collecting.  I'm very versed with the rules of my pension at work and have to explain these rules on almost a daily occurrence. Just because an attorney or even a judge grants you something does not mean a pension will have to accommodate your legal proceedings.  It's not the pensions fault your attorney or judge did not understand the pension's rules.

With my pension it's written in law that an ex-spouse is not entitled to any of the pension holder's benefits!!  They can only receive the spousal benefits.  This gets really messy because every time the pension holder remarries the spousal benefits are divided equally amongst his current wife and all ex-wives!!! The other thing is no spousal benefits will be paid out until the pension holder either retires or dies. I currently know several people that have 50 years of service and keep working because they don't want an ex-spouse from 20 years ago to receive any money.  I'm by no means trying to scare you, but I wouldn't count on this money until you actually have it in your hand....