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Chapter 18. Cashing In or Out of Your 40... > A Divorce Sure Can Mess Up Your Fina... - Pg. 180

Cashing In or Out of Your 401(k) 180 Getting the Funds Because of Hardship Scenario number 3: You quit your job and you have a hardship. Guess what? You can have the plan trustee send a check directly to you, and you don't have to prove to them that you need it. They will automatically withhold 20 percent (don't bellyache, it's the law) for federal taxes, and you will owe state taxes where applicable. There is one bit of good news--but you have to be the right age. If you're younger than 59½, you'll owe a 10 percent penalty on your withdrawal when you file your tax return. However, if you were at least age 55 when you separated from service, the penalty does not apply. If you truly do have a hardship, here's an opportunity to get your money, but it's really a lousy idea unless you really, really need the money. (And if you want to know what a real hardship is, refer back to the safe harbor rules.) Short of robbing a bank, you'd be better off finding another way to finance the hardship. And if your idea of a hardship is buying a new boat, you need to go back to Chapter 2 and start reading all over again. A Divorce Sure Can Mess Up Your Finances A Qualified Domestic Relations Order, known in the industry as a QDRO, is nothing to mess with. As mentioned earlier, it is a court order or decree from the court, and it applies to the distribution of property (for example, retirement plan assets) for child support or alimony. In community property states, it becomes part of the marital assets to be divided evenly, or the court can assign the rights to receive all or a portion of your plan benefits to a former spouse, child, or dependent. You can't stop a QDRO. The court circumvents you entirely and goes right to the plan trustees. For What It's Worth