In my last post, I set out 10 basic facts about retirement accounts in divorce in North Carolina.
One of those tips mentioned the taxes and penalties that are incurred upon an early withdrawal of retirement funds. This article from Kiplingers details exactly how this came back to bite one divorcing teacher.
Needless to say withdrawing funds from a 401k or other retirement vehicle needs to be handled very carefully, and with the advice of an attorney or financial professional, if not both. As the article states, there are frequently alternative means of obtaining needed liquid funds that have less drastic consequences.
Ideally, you and your spouse can agree to discuss the division use of retirement funds in a joint problem solving legal process that takes into account your individual goals and needs.
But, even if your divorce becomes combative, and you need funds from your retirement account to pay legal fees or living expenses, proceed with extreme caution and explore your options before raiding a retirement account.