Sanders Law Firm
View Our Practice Areas

Why a loan may be better than a withdrawal from a 401(k)

People in New Mexico who are going through a divorce may struggle financially, and they might want to try to borrow from their retirement account to get quick access to funds. However, this can come with hefty taxes and penalties.

This was the case for one woman who took $100,000 out of her 401(k). She intended to use it for rent and food for herself and her three children since her husband stopped putting money into their joint account. As a teacher, she did not make enough money to support her children on her salary. However, she had to pay around $40,000 in taxes and an additional 10% penalty for making a withdrawal before reaching the age of 59 1/2, leaving her with half of what she expected.

A better option might have been to take out a loan against the 401(k). She could have taken as much as $50,000 with good repayment terms. She might have also had the opportunity to repay it all at once when her attorney filed for temporary support from her husband. However, there are disadvantages to a loan from a 401(k). For example, if she lost her job, she would have to repay it in a short time, usually 60 days.

In a situation like this one, in which one parent is withholding support for children, it may be less likely that the couple can successfully negotiate a divorce agreement out of court. If parents do go to litigation, a judge will make a decision that is in the best interests of the child. This might include taking into account whom the child spends the most time with, the child's needs and the relationship the child has with each parent. Even if the parents have joint custody, parenting time might not be equally split.

No Comments

Leave a comment
Comment Information
  • NAFLA
  • The National Trial Lawyers | Top 40 | Under 40
  • The American Society of Legal Advocates
  • Super Lawyers | Avvo Rating | Superb
  • Star Bar Of New Mexico
  • 10 Best | 2017 | Client Satisfaction
  • Top 10 Attorney And Practice Magazine's
  • distinguished Justice Advocates | top 1% attorneys in America
  • top listed in best Lawyers
  • rated by super lawyers
  • The National Trail Lawyers | Top 100
Email Us For A Response

Contact Us Today. Call 575-578-4392 or complete this form to schedule a free consultation with our legal experts.

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Offices Conveniently Located in Roswell, Albuquerque & Hobbs

Roswell Office
701 West Country Club Road
Roswell, NM 88201

Toll Free: 866-755-7229
Phone: 575-578-4392
Fax: 575-622-5853
Map & Directions

Albuquerque Office
4801 Lang NE
Suite 110
Albuquerque, NM 87109

Toll Free: 866-755-7229
Phone: 505-798-2588
Map & Directions

Hobbs Office
732 E. Michigan
Suite 500
Hobbs, NM 88240

Toll Free: 866-755-7229
Phone: 575-318-2887
Fax: 575-393-0565
Map & Directions

Las Cruces Office
1990 E Lohman Ave
Las Cruces, NM 88001

Phone: 575-222-1111
Map & Directions

Ruidoso Office
1100 Sudderth Dr
Ruidoso, NM 88345

Phone: 575-222-1111
Map & Directions