As you enter into your divorce proceedings in Englewood Cliffs, you may find yourself in need of a quick infusion of cash. This is especially true if domestic responsibilities kept you from being the primary income earner in your marital home. Many come to us here at Schepisi & McLaughlin, P.A. believing that spousal support will provide this, and in certain cases, that may indeed be true. Yet such support is typically only extended when it is needed as a long-term source of assistance. That may not suffice if you need funds right now to help secure housing or pay for vocational training.
Another option may be to cash out the portion of your ex-spouse’s 401k contributions that are due to you. While their 401k funds may come as a result of their individual efforts, contributions to a retirement account made during your marriage come from marital income (thus making them marital assets). Typically an early withdrawal from a tax-deferred retirement savings plans results in an early withdrawal penalty. According to CNBC.com, however, divorce is one of the few cases where you can make such a transaction without incurring a penalty (keep in mind that you will have to pay income taxes on the withdrawal).
Yet before taking advantage of this opportunity, you should consider what you may be giving up. Rolling your portion of your ex-spouse’s 401k into your own retirement account allows you to put that money to work over the long-term (generating additional funds through interest and investment dividends). You must, therefore, decide if the immediate benefit of having the money right now outweighs the potential long-term advantages leaving it alone offers.
More information on dealing with property division can be found throughout our site.
