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I have read that in some instances, if the ex-spouse takes some of the cash out once the QDRO is done, he/she can avoid the 10% penalty and only have to pay taxes on the early withdrawal. Unfortunately, none of the articles I have read say more than this can only be done if the QDRO is done correctly during the divorce. Well, my QDRO is being done now (on XH's retirement), and my attorney has never heard of this, and neither has my accountant. I even showed my attorney one of the more specific articles.

Anyhow, I'm not taking out a "huge" amount, but I do want to withdraw some once the QDRO is signed off on by the judge (next week). And of course I'd rather not pay the penalty if it can be avoided.

Does anyone have experience/knowledge of this?

Thanks.

[This message edited by StillCoping74 at 12:39 PM, July 31st (Thursday)]

StillCoping74, I have never heard of that.

When WH1 and I D'd, I had to take a 401(k)withrawal after the QDRO was executed to pay off a bunch of the debt he had incurred but had my name on. I had to pay the penalty and taxes on all of it.

neverdidithink, in paying the penalty, was that on the amount you wanted before it was taxed or after? I'm assuming the penalty will likely be on the pre-tax amount.

If I remember correctly it was the pre-tax amount.

I did qdro's for two accounts we had. The answer is YES, you CAN take ANY or ALL of the amounts out, and only pay TAXES, NOT the 10% penalty!!! This question comes up a lot. When retirement funds are separated due to DIVORCE, the 10% penalty DOES NOT apply! If your attorney does not know this, then he/she must not have done many QDROs. It's federal tax law, and any attorney should know it. You can find it right on the IRS.gov page as well.

They will automatically take out taxes at a set rate. In my case, it was too much, and I ended up getting about $1000 of it back at tax time..

Eta more info...

You can't take the money out until the QDRO has been completed. Then you have to request the money from the plan adminstrator. Your attorney should be able to help you with this. If anyone is saying they don't know whether you have to pay the the 10%, then be wary. YOU DO NOT.m just taxes. MIT does take some time, it doesn't happen instantly. It happens when the plan administrator gets to it. In my case it was quick, but I know others who have had to wait a while.

[This message edited by Grace and Flowers at 2:41 PM, July 31st (Thursday)]

I did this.

When the QDRO is "official", you should receive a form from the administrator of the plan asking how you want it dispersed...cash, roll-over, leave it, etc...

As long as you take the cash out at that time, you will only have to pay the taxes, no penalty. If however you roll it over, then try to take cash...there is a penalty. Additionally, if you request it in a lump sum with the intentions of setting up a IRA or some type of retirement account, you have a certain time limit to do that without penalty.

I hope I am not misunderstanding this, but it seems your accountant should be fully aware of this.

Let me see if I can find the rules on it for you.

Thank you for the replies! If anyone has specific links, I would appreciate them. I will continue to do research and try to find the info on the IRS website. Thanks again!

Happy to hear I'm wrong. My withdrawl came from MY account. It appears that's the significant difference.

OTOH, Now I'm pissed to learn when XH cashed out his half of my account he didn't have to pay a penalty!

I think I found it! They sure don't make it easy!

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---Tax-on-Early-Distributions

Listed under domestic relations.

LisaP, thanks for the link.

For those of you that have done this, I just want to make sure I do this right. When the judge signs off on the QDRO, the plan administrator will call me. From what I understand, I tell him/her at that time how much I want to take out, and then what to do w/ the rest--roll over, etc. Correct? And they will take out taxes on the amount I request and send me the after-tax amount. Are they the ones that would assess the 10% penalty, if anyone were to try, or is it that I get a form that I turn in w/ my taxes at tax time, and do I then have to make sure my accountant records it correctly so a penalty isn't assessed then?

Also, at what tax rate do they tax the amount I withdraw?

I really like my attorney. The problem is that my attorney outsources all QDROs to a specialist, and so I can't ask the specialist direct questions.

P.S. - Thank you for helping a long-time lurker. I rarely post because my (finally) ex is a detective, as is his AP, and they are savvy on tracking people's social media accounts.

[This message edited by StillCoping74 at 4:59 PM, July 31st (Thursday)]

No, I think YOU have to contact the plan administrator. Because you can always just leave the money where it is, usually. My attorney contacted the plan administrator for the plan I was cashing out. I had to sign some papers and they sent me a check. I'm not sure of the tax rate....I want to say 28%?

The 10% penalty is dealt with when you do your tax forms next year. The tax form you get for the disbursal will show a code, and that code tells the IRS that you do NOT have to pay the 10% penalty. Under NO circumstances should anyone be trying to take 10% now....and as long as the money is taken out following the QDRO it will NEVER be required!

The rest of my money was in a different plan....I went to my Edward Jones advisor and he contacted that plan administrator and had that money rolled over into a new 401k. Then when the tax form for THAT disbursement comes in at the beginning of next year, it shows that it was rolled over, and no taxes or penalties are due. Both show as income on your tax forms, but the part that is rolled over is not taxed.

I hope you can find someone local to help guide you. You can't just wait for the plan administrator to contact you....they won't. They are happy to keep you money, now separated between the two of you. Good luck!

I still don't know WTF I have to do regarding the QDRO from my divorce. I was asked how much I might want to take out, but at the time I didn't know how much I might have coming to me, so I didn't answer. Now I have an idea of how much I might have coming to me, but the QDRO attorney has retired, I don't know who's doing it now, and the plan administrator of ex's retirement account that is being split is putting up roadblock after roadblock.

I still don't understand the process to begin with. I just don't. I kinda know what is supposed to happen and why, but honestly it's just too much for me.

NatureGirl,

I found an attorney who only specializes in QDRO's and had him write up the order to submit in court. He charged me $550 and with that fee did everything with the FT's retirement plan. All I had to do was tell him what I wanted (as far as how it was going to be disbursed) and he did all the calculations on my portion.

It was well worth the $550!! Ask family law attorney's in your area who they use for the QDRO's or friends who've had it done with their divorce. I know its a lot of hassle, but it's protecting your future!