401k Early Withdrawl Divorce

I am getting 10000 from my ex's 401K ~ should I opt in a ROTH IRA ...

My husband and I are now seperated. He has been ordered to give me 10,000 out of his 401K. So he does not have to pay the taxes ~ he wants to transfer it to a IRA for me. In a few years I would like to be able to access this money and buy a home. I am clueless on how IRA’s really work. Just going on this info ~ can someone give me advice on which would work better for me?

The only problem with IRA is that if you spend it you would have to pay the taxes. You aren’t really able to spend it till you are retired even if its from your ex. Say if you never divorced and your ex used his IRA with you to buy a home you would still have to pay taxes on it. The reason why he didn’t get taxed is because he had to give it to towards your retirement.

Roth and Traditionals have a limit of $4000 a year. Meaning you can only contribute up to $4000 between the two NOT each !!!

Please talk to a tax accountant and ask if a transferring it will fall under this limit as well. If a transfer can take place then you need to open an IRA with a firm and provide his firm with that info. No need for you to give him any info. Let plan holders do this.

A Roth will be your best bet if you can transfer it. You can touch this money at any time with no penalty. You MUST leave in this account though, any interest is has accumulated.

Good Luck !!

: )

Here’s the deal, you can only rollover money from a 401k into a Traditional IRA because the two are taxed the same. You can take up to $10,000 out of a Traditional IRA for a first home penalty free, but you must pay income taxes on any withdrawal. In a Roth IRA, you can withdraw funds tax and penalty free (and you can take out all Roth contributions at any time for any reason! –just not earnings on those contributions unless it’s for a home/tuition/etc.).

So your options are: 5. Have your husband cash out the $10000 and give you a check. Tell your husband you don’t want an IRA, you want cash! His tax issues are no longer your problem! This will likely ruin the relationship, though, as he will have to pay the taxes and the 10% penalty. Plus make sure the court ordered him to give you exactly $10000–or he may be able to take the taxes/penalties out of your cut.

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