QDRO and distributions prior to 59 1/2

Submitted by Brian Smith on Thu, 2017-08-31 18:41

Husband and wife are getting a divorce. Husband has 401k and investments. Wife has IRA.
House is involved. With the QDRO, can the wife take a distribution from her 401(k) to buy out the equity of the husband and avoid the 10% tax penalty if she is under 59 1/2? Or would avoiding the 10% pre-59 1/2 penalty require the husband split the 401(k) via the QDRO and then the wife take her portion and pay orinary income tax on her share and no 10% penalty and buy him out.

Hope that all makes sense.

Thank you.



Submitted by Brian Smith on Thu, 2017-08-31 18:43

I meant to say, can wife take a distribution from her IRA and buy out equity of other spouse in a home as part of a QDRO and avoid the 10% pre-59 1/2 tax penalty.

Submitted by Jose Morales on Thu, 2017-08-31 19:45

The QDRO will not change how any distribution from the wife’s IRA is reported or taxed.

Submitted by Alan - IRA critic on Thu, 2017-08-31 23:36

If the wife still has her QDRO interest in the 401k, and IF the plan document allows her to take distributions, the penalty would be waived, but only for distributions taken directly from the 401k. If husband is still working for the 401k employer the plan may not allow her to take distributions until some later date.

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