QDRO vs IRA Transfer via Divorce Decree
A husband and wife are going through a divorce. Husband has 400k in an old 401k plan and the wife asked me about the expense of doing a QDRO vs just splitting the account from an IRA via a court order. Does it makes more sense to have them execute a QDRO and then split the 401k, or could the husband just rollover the 401k to his own IRA right now since he is no longer employed at that company, and then have the IRA split 50/50 via the divorce decree? It seems like this would save them the expense and headache of executing a QDRO. This may not be your area of expertise but I thought I would pose the question.
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-15 02:27
The QDRO would cost more, but the extent is hard to quantify. It would also take more time. With a QDRO, the wife would be subject to RMDs based on husband’s age, but distributions from the 401k to the wife would also be free from penalty if wife is under 59.5. Therefore, the best choice is dependent on different factors.