Divorce and a primary residence…
What are the rules for using a 401K in a divorce to keep a primary residence to reduce the mortgage so it is affordable? Also if there are provisions that allow for this what are the rules governing taking those funds from a current 401K where I’m currently employed? Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2016-03-08 02:33
Are you saying that a proposed marital settlement leaves you with both a share of the 401k and the residence, but you need to take 401k distributions to cover the residence costs? If so, you might qualify for hardship distributions under the plan while still employed, however such distributions are subject to both tax and penalty. Or if your plan offers loans, you could apply for a 401k loan to use to meet expenses. That said, you would be in a difficult cash flow position and any loss of your job triggering loan repayment could be a disaster.