Getting a divorce in Clinton Township can quite daunting, especially if you were not the primary wage-earner in your marital home. Even with the potential promise of spousal support, you may face an uncertain financial future. You may need to pay for a new home, put a deposit on a rental property, or pay to return to school or receive vocational training. Many in your same position come to us here at The Law Office of Lorrie J. Zahodnic, P.C. questioning where they may get these funds. Like them, you may be surprised to by to learn one potential source may be your ex-spouse’s 401k.
The contributions made to your spouse’s 401k during your marriage qualify as marital property and thus are subject to property division. You may have heard that early withdrawals from a 401k account can prompt a tax penalty (early withdrawals are those made before plan participants turn 59 1/2 years old). While that is true in most cases, according to information shared by CNBC.com, a divorce is an exception. Provided that the court issues a qualified domestic relations order in your case, you can withdraw your portion of your spouse’s 401k without incurring a penalty.
There are certain drawbacks to this decision, so it is one that should be well-thought out before making it. The most obvious is the potential for lost interest and investment earnings that you could accrue if you roll your portion into your own retirement account. You will also have to pay income taxes on the funds that you receive. If, however, you are in immediate need of money, this could prove to be a viable option. More information on preparing for your post-divorce life can be found throughout our site.