Raiding Your 401(K) Can Be a Divorce Disaster

Many divorcing spouses find themselves strapped for money to pay for mounting legal bills and the higher costs of supporting two households, rather than one. With bank accounts and brokerage accounts drained to zero, some look to tap their employer 401(k)s or IRAs for quick cash to cover these costs. Within a few days, you can have the balance of your retirement account, or even just a small portion, deposited into your checking account. It's so easy! What could possibly go wrong?

In fact, direct withdrawals from a 401(k) or IRA can be financially disastrous. Retirement savings are meant to remain in place until you reach retirement age, and the government has put in a tax system that penalizes those who