I only mentioned placing the money in the TSP to avoid taxes.
I still think there is a missing piece here. I've re-read Coastie's responses several time.
However, it seems to me that there should be several figures that all come together to define the total settlement that Coastie is receiving.
I understand that Coastie's wife is buying him out of the house. That means for that, Coastie get $H (for house).
Also, I assume that his wife's 401k, or at least part of it, was a joint marital asset that now needs to be divided. Let's call Coastie's portion of that 401k $K (for 401k).
Then, there may be other miscellaneous items that his wife is having to pay him for; say 1/2 the total of the fair-market-value of any other jointly owned assets (cars, personal belongs, household items, etc) that his wife wishes to keep. Let's call that figure $M (M for Misc).
Now, there may be some assets that are joint and in Coastie's name, and/or that Coastie wants to keep. Those have to be accounted for as well as 1/2 of those are his wife's. Let's call that amount $C (C for Coastie's).
So, in this simple approach, the settlement that Coastie gets from his wife is:
Total Settlement = ($H + $M - $C) + $K
I wrote the equation this way because there are two parts to the settlement; that which is liquid, non-taxed monies, and that which is a 401k withdrawal.
Now, if this is all correct, then $H and $M are liquid, non-taxable monies. These are what his wife owes on the house and other items she is keeping. Furtheremore, if the amount Coastie owes his wife ($C) is less than the total of $H + $M, then it's a net positive, and she owes him a total, and it sounds like that total is $28k, and it sounds like she has to (or is choosing to) take money out of her 401k to cover that amount ($H + $M - $C).
As for $K, that is the amount that in my opinion should be rolled over into the TSP or an IRA to avoid taxes.
The question to Coastie is:
Do you understand the rather simple equation I present, and how part of the total settlement is liquid, non-taxed, and the other less-liquid retirement funds?
If you understand where I am going, then my next question is:
What makes up the $28k you mention? Is the $28k = $H + $M - $C?
Or, is the $28k the value of $K? If it isn't, then is there a $K greater than 0? If not, why not?
TJR