I am in the midst of negotiating a divorce where my spouse would prefer, whenever possible, to get cash instead of a retirement account.
I have found many sources online (e.g., this one) stating that a QDRO distribution allows a transfer of funds out of a 401(k) or traditional IRA to a non-holding spouse without the 10% penalty in the event that the spouse is under 59½. The only catch is that, because no tax was ever paid on these assets, the distribution is fully taxable in the year it is received.
I'm having far more trouble finding out what happens with a Roth 401(k).
- Is a QDRO necessary to split a Roth 401(k)?
- Can the spouse receiving the funds liquidate their share of the Roth 401(k) without the 10% penalty?
- Barring that, before the divorce, can contributions to the Roth 401(k) be withdrawn penalty-free (and then divided in the settlement)?
- If the spouse instead rolls over their contribution to a Roth IRA, would they ever be able to do an early withdrawal of those funds?