Like many of those seeking a divorce in Salt Lake City, you may look forward to the impending dissolution of your marriage with a certain degree of relief. Yet mixed with those feelings may also be a certain sense of trepidation as your begin to ponder your post-divorce future.
If, for example, you were not the primary income earner in your marital, you may have concerns about securing the immediate funds needed to afford new housing, resume your schooling or initiate needed vocational training. Many in your same position have come to us here at Scalley Bates Reading Hansen & Rasmussen, PC questions where they might find such money. Spousal support may offer some immediate assistance, yet that is not guaranteed in every divorce case. Another often overlooked source of financial assistance may be your ex-spouse’s 401(k).
Dividing up 401(k) funds in a divorce
As the contributions made to your ex-spouse’s 401(k) account came from marital income, the court views them as marital assets (thus making them subject to property division). You may think that taking an early withdrawal from a tax-deferred retirement account will almost certainly net a stiff penalty (and in most cases, you would be right). However, according to information shared by CNBC.com, divorce is one of the few scenarios where you can make such a withdrawal without any penalties.
Weighing the pros and cons
You should keep in mind, however, that you will still have to pay income tax on the withdrawal. On top of that, cashing in your portion of a 401(k) right now eliminates the potential of those funds growing over time through investment returns and interest. These are factors to consider when weighing the benefits and consequences of such an action.
You can find more information regarding property division throughout our site.