Disability Distributions

Submitted by Jared Houseman on Wed, 2014-04-23 15:58

We have a client who has a 401(k) with a previous employer and she may be rolling it over to an IRA with us. She also needs to withdrawal some to pay debt. She and her husband are both 57. Can they withdraw from either the 401(k) under Hardship or from her IRA under Disability because her husband is fully disabled? Or does she have to be the one disabled in order to do that with her IRA?



Submitted by Alan - IRA critic on Wed, 2014-04-23 22:25

The disability penaly exception is limited to distributions from the retirement accounts of the disabled taxpayer. It does not apply to the distribution from a spouse’s account.

Submitted by mk foss on Fri, 2014-04-25 23:26

The disabled person can use the disability exception to avoid the 10% penalty on the disstributions but they are still taxable in full. The non-disabled spouse might be able to use the exception from the 10% penalty for medical expenses if they exceed the deduction limit. Again the distributions are fully taxable and only penalties can be waived.

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