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Asked 6/1/2011
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Will I lose my disability income if I am awarded my husbands 401K? I get $511. a month on disability & was divorced in May. Will I lose all my disability benefits because I was awarded a 401K which I have to pay at least 20% taxes on & I also was awarded alimony of $1300. a month. If I do loose it will I get my SSI back? I am 61 yrs. Old & will lose the alimony in 9 years because he will retire. If I lose my disability I won't have any insurance which I can't buy because I am disabled. What should I do with the 401K, cash it & pay the penalty which is about $7000 ? I see no reason to roll it over & keep it in there because I can't pay into it or use it as a savings so I thought just put it in a saving account & I can add more to it.
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Answer 1/1 - Submitted 6/1/2011
Roll the 401K into an IRA where it can sit and draw interest only. You'll avoid taxes, penalties, etc and don't have to worry about it until age 65 or longer. There is also a way to maintain your SSDI, get your alimony and make deposit into the IRA. The limit of money you can make while on SSDI is about $1000 per month without losing the benefits. I suggest before you sign anything get over and talk with a social security attorney to see how splitting the alimony into two accounts would affect SSDI and maybe an investment counselor for the 401K
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