QDRO And taxes YIKES!

What is the name of your state?

California

I am divorced and have completed all the QDRO stuff, except for deciding if I should roll over ALL the pension monies(husband's pension plan, btw) into an IRA except for a small portion. I know that IRS will take out 20% from this portion before I receive it, but do I have to pay an addtional 10% penalty when I file my taxes at the end of the year? Meaning 30% in all?

I have been hearing and reading conflicting answers to this question. One person told me that I would also be taxed an additional 20% on the money received at the end of the year, which makes it sound more like a 50% cut.

CONFUSED!!!!

Pension plans and IRA's are both considered qualified plans. You aren't penalized for rolling money over from one qualified plan to another unless you withdraw monies from the plan itself or if the pension specifies a penalty for rolling over.

Are you planning on rolling the money over and then withdrawing it, or keeping it in an IRA until you reach the appropriate age for scheduled fund withdrawls?

Hi, I over and underexplained myself..

I was thinking of putting about 90% of the money into an IRA for the time being(deciding if there are better options down the road later-better stuff/more dersified) and letting it sit until retirement.

My question is more towards the 10% I choose not to roll over. T

To make it simple for me, let's say I elect to be given $100 in a lump sum (putting $900 into an IRA). I understand that the IRS will take out 20% in taxes before I receive it, so this means I end up with $80. At the end of the year, when I file my income tax, I must pay a 10% penalty for early withdrawal AND pay let's say another 20% because the government sees this as "income".

SOOOO..it would almost like taking in 50% of the money or $50 out of $100 (give or take everything else).

I have been reading so many internet sites/forums and calling this person and that person. I think some of the internet sites are saying that the owner of the plan doesn't have to pay a 10% penalty, etc. but they aren't addressing the non-owner of the plan.
???????

You would incur a tax penalty on the front end and the back end from monies that you withdraw from an IRA. It does seem like a lot and it is. It is designed that way because your IRA is for retirement. The only person taxed is the owner of the plan because that is the only person who may make transactions regarding the plan. What is the stipulation of your divorce that you are asking about his plan? Was it awarded to you?

Retiring the Dream

It was stipulated in the divorce decree that I would receive this money.

When I look at this now-it hasn't been as equitable as I thought it would be. I got less than half of the equity of the house (this money wouldn't have been taxed or seen as "income") because he said "he'd make it up from the pension plan". I need cash/liquid assets now, but it seems as though it will be too costly to receive it this way.

In other words, yes this money was/is meant for retirement, however if there is a divorce, many plans/dreams, etc. life have to go by the wayside.

Yes, you are right. The pension plan does represent equity, but it isn't liquid.