Taking Loans From Retirement Accounts

divorce retirementBy Jennifer M. Paine

Divorce Lawyer, Cordell & Cordell

Did you take out a loan from your retirement account to pay credit card bills, to repair the roof or for a vacation? Then you’re like most guys.

The bad news is for most retirement accounts, loans are not dividable – which means you are left paying back the entire loan after your divorce.

The good news is (yes, there’s good news) the loan is also a marital debt that should be divided between you and your spouse.

Even though you cannot physically divide it in your account, you can account for it by dividing the account net of the loan.

Read your settlement or divorce decree carefully to make sure that language is there – otherwise, the plan rules may default to you paying the loan and sharing in the account as if the loan had never been taken.

Do not sign either until the language is in there. This is language to negotiate before you settle or to request specifically at your trial.

Even if the plan does not have such a default rule, it does not hurt to specify your and your ex’s intent to account for the loan – why leave wiggle room for a different result, i.e. more money for her, later?


Read the other divorce articles in our retirement advice series:


Jennifer M. Paine is an Associate Attorney in the Detroit, Michigan office of Cordell & Cordell. She is licensed to practice in Michigan, and has been admitted pro hac vice in Illinois, Ohio, and the United States Court of Federal Claims.

Ms. Paine received her BA in English and Mathematics from Albion College and graduated Summa Cum Laude. She received her Juris Doctorate from MSU College of Law and graduated Summa Cum Laude.

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