As you approach the conclusion of your divorce proceedings in Cincinnati, a sense of finality may certainly begin to set in. With that may also come the realization that (if you were not the primary income earner in your marital home) you may face certain financial uncertainties.
Many in your same position have come to us here at the Fogelman Law Firm questioning where they might secure an immediate infusion of funds to help pay expenses, secure new housing or afford school or vocational training. If you share the same question, one potential area that you likely overlooked is your ex-spouse’s 401k.
Early withdrawals from a 401k
If you have yet to delve into property division proceedings, the fact that their 401k is a marital asset may come as a surprise to you. Yet since contributions to such an account often come from marital income, they are thus marital assets. The typical assumption is that you will want to roll these funds over into your own retirement account, yet that may be due to the belief that cashing them out know would result in an early withdrawal penalty. Yet that is not the case.
According to information shared by CNBC.com, divorce is one of the few scenarios where early withdrawals from a 401k will not incur a tax penalty. You will, however, have to pay income tax on whatever amount you receive.
Is it worth it?
Before deciding on this course of action, you should first consider the implications. Taking the money now means forgoing any potential growth it may generate if you leave it alone until you reach retirement age. Whether or not the amount sacrificed by cashing out now is significant depends on how close you are to retirement.
You can learn more about asset division during divorce by continuing to explore our site.