QDRO distributions penalty free
- “Assets distributed from a qualified plan under a QDRO are exempt from the 10% early withdrawal penalty.”
Is this true regardless of age? Husband and wife get divorced. Both are 57 years old. A QDRO divides husband’s retirement account, creating one for the wife. Can wife withdraw from her new account penalty-free even though both of them are under 59 1/2?
She wants to withdraw a portion from the new account penalty-free, and then rollover the remainder into an IRA. Does this sound correct?
Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2025-01-24 12:29
Yes, all distributions from the 401k are penalty free due to the QDRO exception, but not penalty free from an IRA until 59.5.
But if the participant is still active in the plan, the wife may not be eligible for distributions until the participant is 59.5, as the alternate payee generally cannot receive distributions until the participant could receive them.
Permalink Submitted by Joe Messina on Fri, 2025-01-24 13:54
Thank you Alan.