The third option seems like it can’t possible be the best. It would take 20 years to get $200k at $850/month and you are losing all profit on that money in the mean time by waiting 10-15 to even start getting the money and another 20 to get it all.

Would the lifetime monthly pension activate when you officially retire? Or at a certain age?

Anonymous wrote:3rd option - take the monthly pension payment in retirement - is the best if you are solely concerned about minimizing taxes. You won't pay much in federal taxes on $850/month when you are no longer working.

+1. The lump sum is almost certainly calculated as the actuarial equivalent (or less) than the monthly annuity. So if you think you can beat the actuary’s assumption for life expectancy, always take the annuity. And keep in mind the adjustment does not account for your gender, race, weight or health conditions—it’s based on national averages (maybe blue collar or white collar). If you think you can beat those, the annuity always makes more sense. Even if you don’t think you can beat them, the annuity may make more sense because your tax liability in retirement is likely to be lower.

I would pay someone a couple thousand to help you figure this out

I’d take distributions over the five years. Hopefully it will continue to grow some (if the market ever recovers). Use the windfall to max out your TSP contributions on your salary if you aren’t already doing so.

Anonymous wrote:3rd option - take the monthly pension payment in retirement - is the best if you are solely concerned about minimizing taxes. You won't pay much in federal taxes on $850/month when you are no longer working.

I'd do the math on this carefully. How much tax OP pays on this will depend on how big the rest of her income is. Meanwhile, $850/mo for 25 years (guesstimating a long life and long retirement) still amounts to only $255k over that stretch and it seems like OP could do a lot better than that taking the money in the nearer term and investing it. I'd be inclined to take the rollover/5 year option.

3rd option - take the monthly pension payment in retirement - is the best if you are solely concerned about minimizing taxes. You won't pay much in federal taxes on $850/month when you are no longer working.

Yearly and then designate a portion to go directly from the pension to your Roth to allow that the annual Roth contribution AND avoid taxes on that part of the pension distribution.

I like your 2nd/3rd options better than the first. Clearly you don't need it now (or even later). 40k per year is much better than tax on 200k, no?

CARES Act changed that: Withdraw all funds by the end of five years after the owner's death (only if the account owner died before 2021). Withdraw all funds by the end of 10 years after the owner's death (only if the account owner died in 2021 or later).

He died before 2021.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I inherited ex-husband's $200,000 pension, I was listed as beneficiary. Older teens/college students were left healthy trust funds which will cover college costs, grad school, home down payment.

I am 52 have a heathy TSP, pension with government, taxable account, Roth IRA, Ibonds, home is 3/4 paid off, no debt.

Since I am not a spouse, I seemingly have two options - lump sum/pay a ton of taxes or roll into inherited IRA which would have to be withdrawn completely within 5 years.

What is a good withdrawal strategy with respect to taxes?

Why five years? I thought it was ten.

Because I am an ex-spouse. Fwiw, he never remarried.

np - i didn't know that made difference. i too thought it was 10

Anonymous wrote:

Anonymous wrote:I inherited ex-husband's $200,000 pension, I was listed as beneficiary. Older teens/college students were left healthy trust funds which will cover college costs, grad school, home down payment.

I am 52 have a heathy TSP, pension with government, taxable account, Roth IRA, Ibonds, home is 3/4 paid off, no debt.

Since I am not a spouse, I seemingly have two options - lump sum/pay a ton of taxes or roll into inherited IRA which would have to be withdrawn completely within 5 years.

What is a good withdrawal strategy with respect to taxes?

Why five years? I thought it was ten.

Because I am an ex-spouse. Fwiw, he never remarried.

Anonymous wrote:I inherited ex-husband's $200,000 pension, I was listed as beneficiary. Older teens/college students were left healthy trust funds which will cover college costs, grad school, home down payment.

I am 52 have a heathy TSP, pension with government, taxable account, Roth IRA, Ibonds, home is 3/4 paid off, no debt.

Since I am not a spouse, I seemingly have two options - lump sum/pay a ton of taxes or roll into inherited IRA which would have to be withdrawn completely within 5 years.

What is a good withdrawal strategy with respect to taxes?

Why five years? I thought it was ten.

OP again -third option was to draw a monthly benefit of about $850 after I retire.

I inherited ex-husband's $200,000 pension, I was listed as beneficiary. Older teens/college students were left healthy trust funds which will cover college costs, grad school, home down payment.

I am 52 have a heathy TSP, pension with government, taxable account, Roth IRA, Ibonds, home is 3/4 paid off, no debt.

Since I am not a spouse, I seemingly have two options - lump sum/pay a ton of taxes or roll into inherited IRA which would have to be withdrawn completely within 5 years.

What is a good withdrawal strategy with respect to taxes?