How 401K is Valued During Divorce
I recently was divorced and they valued my 401K in actual value. I grew it in pretax dollars in the first case. I have to pay tax and penalty upon early withdrawal. Which takes it down 40% or more. I tried to withdra it so I could make a down payment on a house but found the value so low, it was ridiculous. Why did they not value the IRA at the lower amount if she git the house at the equity amount? In other words… If the value of th house is $300,000 in equity and my 401k value before penalty is $400,000 why do I have to equalize at $50,000 even though the IRA (cash value)is only actually only worth about $220,000. Shouldn’t the courts take the value after the penalty? or split it all equally so she has to pay half the penalty IF she withdrew it to pay for the house.
NO, the courts do not take into consideration the amount of the penalty because it is not a certainty that you will cash it out early. Courts assume that the money will be drawn out at retirement without tax or penalty.