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Deductibility Limits on Traditional IRA Contributions & IRA Contribution Limits from 2002 to 2012
Hardship Withdrawals and Accessing 401(k) Loans
401(k) Rules – Contribution Limits, Catch-Up Contribution Rules, Vesting Rules, 401k Eligibility Rules
Salary Deferral Contributions Made to 401(k) Retirement Account
Important Year End Statements for Individual Retirement Account (IRA) Holders
5 Things Every 401(k) Plan Should Have
The Roth 401(k) – How After-Tax Contributions Work, Comparisons with Roth IRA, Future Tax Rates, Contribution Limits & Frequently Asked Questions
What is a Traditional IRA? History of IRAs, Eligibility Requirements, Ineligible Compensation, Distributions from a Traditional IRA & How Income Tax Deductions Work
How to Invest in Real Estate using your Individual Retirement Account (IRA)
Rolling your 401(k) – Trustee to Trustee Direct Rollover, Modified Adjusted Gross Income (MAGI) Income Limits for Deductible Contributions to a Traditional IRA
401(k) Vesting – How It Works, Vesting Schedule, Number of Years of Service
401(k) Lump Sum Distributions – Tax Advantages, Rollover to IRA, Tax Deferred Contributions and more
401k Rollovers to an Individual Retirement Account (IRA) – Things to Consider Before You Rollover, Avoid Transfer Penalties, Move Employer Stock, etc.
401(k) Withdrawals – Early Withdrawal Penalties, Rollover Withdrawals, Exceptions and Tax Consequences
Understanding the Rules for Participating in a 401(k) Plan, Beneficiary Appointment, 401(k) Plans for High Paid Employees

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Top Frequently Asked Questions about 401(k) Plans

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e) Divorce

I am going through a divorce and my spouse has a 401(k). How can I make sure that I get my fair share and will I have to pay tax on this?

- The 401(k) should be split between the two through a valid qualified domestic relations order (QDRO) document. A QDRO is a court order that allows a part of your spouse’s 401(k) money to be given to you. If this document is made properly, neither spouse will have to pay a 10% early withdrawal penalty, even if both of you are 59 and ½ years of age or less.

- What options do you have if you do get money from your spouse? You can either leave the money in the 401(k) account or in a separate account managed by you. You could also rollover to an IRA and manage the money yourself or in to another employer sponsored retirement plan. Any of these options will keep the money tax-deferred until withdrawal. What you intend to do with the money must be stated in the QDRO document. Also, you should always hire a divorce attorney to file a QDRO document as it can be very tricky. You should also consult a divorce planner as the long term implications of divorce can be financially severe if not handled properly.

I haven’t seen my spouse in more than 2 years and have no idea where he/she is. I would like my 401(k) beneficiary changed to my children instead of my spouse, but I was told I need my spouse’s approval. Why can’t I name whomever I want as my beneficiary?

- The 401(k) laws require that you need to have consent from your spouse in order to name someone else as your primary beneficiary. This law is in favour of both the man and the woman in the family. If you do manage to change your beneficiary from your spouse to your children without the consent of your spouse, and suppose your employer pays the retirement benefits to your children upon your death, your spouse could in theory sue your employer. This is why you were probably told you need your spouse’s consent before the beneficiary is changed.The best thing is to check with your employer if they require your spouse’s consent.

My husband and I are getting divorced and he wants half of my 401(k) account. As if this isn’t bad enough, I do not want his girlfriend to get any of the money after he dies. Can I get this money to go to my children instead?

- Legally, your spouse has a right to claim a portion of your 401(k), however the exact specifics should be stated in the divorce agreement. If your husband agrees, you could have the right to appoint who gets to keep the money in the event of his death. However, this is only possible if the money stays in the 401(k) account and does not get withdrawn. If it goes get withdrawn by your husband, then you will have no idea where the money is kept, and if it is mixed with other money of your spouse.

I was recently given half of my ex-spouse’s 401(k) money. When do I get this money and will I have to pay tax on it?

- The divorce agreement should state when you can take the money out of the plan. The agreement however may not let you take your share until your spouse takes his or her share. If this point is not mentioned in the divorce agreement, then you can take the benefit on the earliest retirement date provided under your ex-spouse’s plan. You can obtain this date from your ex-spouse’s employer and yes you will be responsible for paying taxes on it if you withdraw the money from the 401(k) account. However, if you roll it over to an IRA within 60 days, you can defer all taxes.



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