Good Morning!

I have a question this morning regarding this QDRO term I have just learned. The definition is very unclear, even after going over the definition in the dictionary several times dissecting it carefully. 

My husband of 20 something years, and I are in the process of getting a divorce. He will be sharing the last 401k. We have been together since January of 2000 but didn’t marry until 2008. So that being said... I will probably get approximately 30k.  Now, does that mean...if I f take cash there will be penalties right away?


thank you!


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Bronze Conversationalist


By penalties, are you referring to the 10% Excise Tax? If elected, your QDRO distribution as an alternate payee from the 401 K (Qualified Plan) will be subject to ordinary income tax, but not the 10% Excise Tax (aka penalty). Be aware that if you roll your 401 K distribution (QDRO payment) to an IRA in your name, any subsequent distributions from that IRA will be subject to ordinary income tax and the 10% Excise Tax if you are under age 59.5 and do not meet any of the exceptions for an early withdrawal. You or your attorney should obtain a copy of the 401 K Summary Plan Description (SPD). That SPD, if kept up to date by the Plan Sponsor or Plan Administrator, should provide whether or not alternate payee distributions are paid out immediately. Hope this helps. 

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Regular Social Butterfly

Based on my experience you want to retain the tax deferred status.  If you convert to taxable all $30k is added to your current TY's income.  If you are <age 59 you'll suffer an additional early encashment penalty atop the regular Fed tax.  If >age 72 you will need to start required minimum distributions and failure to do so could result in a 50% tax on the amount under-distributed.

I suggest you get some credible tax advice 

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