When the QDRO is signed by the court, it allows your plan provider to transfer a portion of your 401(k) to your ex without penalties or taxes consequences.Timing is critical if you want to avoid the tax consequences of transferring a portion of your 401(k) in a divorce settlement. If the transfer is made without a QDRO and before you've reached age 59½, the Internal Revenue Service will charge you a 10 percent penalty for the withdrawal.If you find yourself in desperate financial straits, however, you can withdraw the money early, but you'll face income taxes and extra tax penalties.
This information is provided for illustrative purposes only and is not intended to constitute legal, financial, or other advice.
She is the author of several novels including the bestselling "Comes the Rain" and "With Every Breath." Bird also has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law.
If you're like most people, when you make contributions to your IRA, you intend to leave the money alone for decades until you can comfortably retire.
Most plan administrators are exacting about the language that must be included in a QDRO, and the language is usually unique to each particular plan provider.
You'll have to make sure your QDRO contains the correct wording so your plan provider will accept it, then have the divorce court judge sign it.