Michael E. Golub, P.A.

Can you cash out your portion of a 401k in a divorce?

If you are like many of those entering into divorce proceedings in Tavares, one element that you were not prepared to deal with was dividing up your ex-spouse’s 401k. In actuality, their entire 401k is not subject to property division, but rather only those contributions made during your marriage (as they were likely made from marital income). Depending on the length of time that you were married, your portion of those contributions could be significant. Such an infusion of funds would not be a great benefit as you transition into your post-divorce life. Yet are you allowed to withdraw them right away?

Before contemplating that question, you should first confirm that you actually want to. The advantage of placing funds into a tax-deferred retirement account is two-fold: first, as is implied in the classification of such accounts, you do not pay taxes on them until they are dispersed. Second, leaving them alone allows them to earn you additional income through investment earning and interest that can benefit you when you retire (and yes, rolling your portion of your ex-spouse’s 401k contributions into your own retirement account is an option).

Yet if you are in need of immediate funds (and any settlement that could be coming from your divorce or through spousal support will not be sufficient to meet your needs), you should that, per information shared by CNBC.com, you can indeed withdraw 401k funds as part of your divorce without the fear of incurring the standard 10 percent tax penalty (you will, however, have to pay income tax on the funds you receive). You simply need to present your ex-spouse’s retirement plan provider with the Qualified Domestic Relations Order issued in your case (as only this authorizes them to make payments to an alternate payee).

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Michael E. Golub, P.A. 819 West Main Street, Suite B Tavares, FL 32778 Phone: 352-508-1637 Tavares Law Office Map