Don't Give Your Nest Egg to Uncle Sam

Step 4. Special Situations

Divorce is one of the special situations covered in depth in Slott's book. "Make a mistake," he says, "and the retirement plan assets will end up taxable to one or the other of the spouses." Slott explains that a retirement plan can be split in a divorce and keep its tax-sheltered status, but most attorneys don't know how to correctly word the division.

If it's a 401(k) account, the plan must be served with a qualified domestic relations order. One tip: the non-employee spouse should then roll his or her portion of the account into an individual IRA, giving more flexibility. Left in a former spouse's plan, distributions may be restricted until your ex-spouse retires!

Dealing with retirement account issues is not a linear process. As Slott notes, it can't easily be reduced to steps or order of priority. Each of his checklists leads to another, depending on your answers to each question. With substantial retirement assets, you might need individual help. You can search for one of the "Elite IRA" financial advisers or attorneys that Slott has personally trained and certified by going to his Web site: www.IRAHelp.com.

But even if you're dealing with a relatively small amount of money, it's worth making the investment in Ed Slott's new book. And that's The Savage Truth.