Wife’s Unknown Whereabouts a Major ‘Technicality’ in Getting 401(k) Funds
Q: When I signed up for a 401(k), my employer said I must designate a beneficiary, so I just put down my wife’s name, even though we had never actually lived together and I wasn’t sure then whether we ever would. Now I no longer work at the company and have requested a withdrawal of my funds. My request was rejected because it required spousal consent and her signature. The trouble is I don’t even know her whereabouts. My landlady can attest that my wife has never lived with me. Is there another way to get the money that belongs to me, or is it doomed to stay there forever? Should not truth carry more weight than a technicality?
A: How untidy of you to misplace your wife. And given that the “technicality” you refer to is a legal marriage, the short answer is no. Your “truth” should not cancel laws designed to protect spousal interest in retirement funds.
You’ll probably need to get a divorce decree to get your hands on the money. To get a divorce, you may need to share some of the 401(k) with your wife, because retirement accounts are generally considered shared property regardless of who made the actual contributions.
If you can’t find your wife, the process is going to be a lot more complicated and you’re going to need some legal help. Check with your local Legal Aid Society if you can’t afford an attorney.
No Changing IRA Distributions
Q: Until 1991, my minimum required distributions from my individual retirement account were based on joint life expectancy. That year I became a widow and reverted to calculating the distributions based on my age alone. I recently read about a federal rule that allows retirees to use the joint life expectancy of themselves and their oldest child to calculate the required minimum distribution, which has the effect of reducing the payout and thus reducing taxes. May I now change to a joint life expectancy using the age of my oldest child?
A: Oh, dear. Not only may you not change the way you calculate your distributions now, but it’s also possible that you shouldn’t have done so earlier.
The IRS set up minimum required distribution rules for retirement accounts to make sure that Uncle Sam gets his share of the money that’s been growing tax-deferred all these years.
Although you have options on how you calculate your minimum distributions, the IRS rules require that once you pick a method, you stick with it for the rest of your life.
The rules are somewhat different if you inherited the IRA from your spouse. In that case, you had the option of rolling the assets over into your own name and choosing another calculation method. But again, once chosen, you’re required to use the same calculation method until death.
You can learn more about required minimum distribution rules by reading “IRAs, 401(k)s and Other Retirement Plans: Taking Your Money Out” by Twila Slesnick and John C. Suttle (2000, Nolo Press).
It’s also a good idea to discuss your distribution plans with a qualified tax professional before making any decisions because, as you can see, your choice is supposed to be irrevocable. Your best move at this point may be to hire a tax preparer who can review your situation and advise you what to do next.
Taking Responsibility for Debt
Q: I liked what you had to say to the single person with college debt, who wanted politicians to “fix it,” presumably by lowering her interest rates. You were abrupt and honest and forthright with that person. But I’m afraid she will still blame someone or something else, since it sounds like she has been doing that for some time. We all need to realize it’s only up to ourselves to get our lives turned around to where we want them to go. Oh well, you tried.
A: You can’t help but feel some sympathy for people who loaded themselves up with student debt, only to find out that jobs in their chosen profession are hard to find. As a personal finance journalist, I have often told people that student loans could be considered “good debt,” because it could be viewed as an investment, much like a mortgage.
Given the number of people who are drowning under huge debt loads, however, that advice needs to be reconsidered. Although it might be too much to ask an 18-year-old to research his or her potential job prospects--most 18-year-olds have trouble even deciding on a major--it’s not too much to ask this of adults returning to school to get advanced degrees.
Debt is debt, and every dollar paid in interest is a dollar that can’t go toward retirement savings or improving your standard of living.
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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.
