Helaine, I’m recently divorced. My ex-wife hasn’t worked for about 10 years. And I’ve been ordered to pay $48,000 in alimony over the next four years—a significant chunk of my monthly income. The alimony doesn’t start until our house is sold, and due to a bunch of refinancings, only the real estate agent will make any money. Should I pay my ex in full from my retirement, pay merely a large chunk out of my retirement, or suck it up and pay her monthly?
You probably know the “right” answer to your question: You don’t remove money from retirement accounts unless you absolutely have no other choice. You’ll pay a 10 percent penalty if you’re under the age of 59½, unless you do it in very specific ways. The one that’s applicable to your situation is called a qualified domestic relations order; it applies to 401(k)s and would have needed to be part of the final financial settlement. You can transfer individual retirement accounts to a former spouse, too, and that also needs to be part of the legal agreement. I’m guessing your divorce attorney already told you all this. But that’s not what you’re really writing about, right?
It doesn’t sound like your marriage ended pleasantly, the reference to sucking it up to pay alimony being something of a giveaway. Ditto your mention of your ex-wife not working in a decade. You’re asking if you should withdraw money from your retirement accounts so you can move on with your life and not think about your ex every time you look at your now reduced pay stub. I sympathize. I really do. But if you can afford to pay your ex-wife’s alimony on a monthly basis, just do it. If you pull from a retirement account, you’ll surely feel regret when you’re too old to do much about it. Besides, I can promise you it isn’t just the money. If you pay your ex-wife off in one swoop, you might just as easily find something else to stew about. That’s the thing about divorce.
One other matter: Presumably your ex left the workforce with your agreement. It likely made your life easier in some ways—I’m guessing you didn’t do too much grocery shopping or errands around the home. Try to think of the alimony not as a financial suck but a thank you for all the support your now former wife once offered you. That’s easier said than done, I know, but you once loved each other, after all. And as raw and angry and bitter as you feel right now, you’ll both move and reach better places in your lives. I promise.
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LawyerLady
I can explain it to you, but I can't understand it for you.
Alimony is tax deductible for the payer and taxable income to the payee. By paying monthly, he will greatly reduce his taxable income. Taking it out of his retirement will cause a penalty and will not allow him all those tax savings over the years.
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LawyerLady
I can explain it to you, but I can't understand it for you.
But will it be better to pay it and not have to deal with ex?
If the ex is a nightmare, sometimes cutting cords is the best thing.
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A flock of flirting flamingos is pure, passionate, pink pandemonium-a frenetic flamingle-mangle-a discordant discotheque of delirious dancing, flamboyant feathers, and flamingo lingo.
But will it be better to pay it and not have to deal with ex?
If the ex is a nightmare, sometimes cutting cords is the best thing.
I don't see why he'd actually have to "deal with her". Put her on automatic bill pay. How often do you actually talk to your electric company or mortgage holder?
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LawyerLady
I can explain it to you, but I can't understand it for you.
A flock of flirting flamingos is pure, passionate, pink pandemonium-a frenetic flamingle-mangle-a discordant discotheque of delirious dancing, flamboyant feathers, and flamingo lingo.
As long as he pays, he does not have to take her phone calls, read her emails, or see her. People complicate things more than necessary. They are adults that were married for over 10 years, he should be able to handle this.
And paying her off with his retirement is a TERRIBLE idea. Talk about cutting off your nose to spite your face.
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LawyerLady
I can explain it to you, but I can't understand it for you.
Sometimes it is worth it to take it like a man, walk it off, but to be totally done with the past so you can move forward. I would pay the lump sum and be gone in a heart beat.
I thought I posted earlier on this thread. It would be stupid to pay it all up front. She could be hit by a Mack truck and die the day after the payment is made and he would be out all that money. And touch his retirement? That is just foolish.
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Sometimes you're the windshield, and sometimes you're the bug.
I thought I posted earlier on this thread. It would be stupid to pay it all up front. She could be hit by a Mack truck and die the day after the payment is made and he would be out all that money. And touch his retirement? That is just foolish.
