Question: My husband and I are in the process of completing our property settlement after a 30-plus-year marriage. He is 57, and I am 54. We own a home ($450,000) that is going to be sold, and the proceeds are going to be divided equally. We have a stock portfolio in his name containing $300,000 in bank stock he bought over the years at reduced rates by using an employee purchase plan that is subject to large capital gains, and a 401(k) in his name worth $350,000. While he is still working, he will pay me $2,500 monthly as alimony, and when he retires at 65, the alimony will stop and I will receive half of his pension ($1,800 monthly) plus Social Security.

The only question remaining is how we will divide his 401(k) and the stock account. My husband says I can have half of the total, and he doesn’t care how it is allocated. My lawyer says that he thinks I will be better off trying to get as much of the 401(k) as possible transferred to an IRA for me so I can continue to defer income until I begin to take withdrawals later. I intend to use my half of the proceeds from the sale of our home to buy a condominium and a new car. Would you please give me your opinion? I have been reading your column for years and value your advice.

Answer: By using a qualified domestic relations order (QDRO) to roll part of your husband’s 401(k) into your IRA, there will be no penalty or tax. And while IRAs allow you to defer income tax until withdrawal, the issue to us appears to be the tax cost of taking out the money at the time you decide to withdraw it. The longer you delay withdrawal (you can wait until age 70-˝, after which you must take mandatory withdrawals), assuming the account is earning each year, the larger your balance will grow due to compounding.

But deferral brings with it drawbacks that should be factored in. For example, every penny you withdraw from your IRA will be taxed as ordinary income and, depending on the amounts withdrawn and your other income, withdrawals could be subject to the maximum federal income tax rate – which is now 39.6 percent – plus state income taxes. In other words, depending on your tax bracket, you could conceivably give up forty cents or more of every dollar you withdraw.

On the other hand, based on today’s capital gains tax rates, the bank stock in your husband’s account that has been held for more than a year, when sold, would be subject to capital gains taxes that could be as low as five percent or as high as 15 percent, depending on your income tax bracket. This would be in addition to state capital gains taxes, if applicable. In other words, if the bank stock continues to appreciate, when you sell it, you would be taxed on the difference between what your husband paid for it and the sales price at between five and 15 percent.

Therefore, depending on when you intend to begin taking drawdowns, capital gains taxes might not look that bad. Of course, in either event, you will be subject to the risk of losing principal depending on your investment strategy and increasing taxation rates, both of which are very important.

While we appreciate your confidence in our opinion, we believe that the assets you take should be based on advice you receive from a certified public accountant after he or she has factored in all of your information and warned you of the risks and rewards.