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How can you keep your full 401(k) in your divorce?

On Behalf of | Oct 28, 2020 | Property Division |

Past posts on this blog detailed the effect that a Qualified Domestic Relations Order has on your property division proceedings. With your ex-spouse having multiple options when it comes to dealing with their interests in your 401(k) (including cashing it out with the fear of netting a penalty).

With all of these options available to them, you may think that convincing your ex-spouse to forego their interest in your 401(k) to be a near impossibility. Yet if concerns exist about how dividing up your 401(k) will impact your retirement plans, you will likely want to know what your options are.

Keeping your full 401(k)

According to the 401(k) Help Center, you may indeed attempt to keep your full 401(k), yet doing so requires that you get your ex-spouse to give up their stake in your 401(k). Such a petition may become more attractive to them if you show a willingness to relinquish your claim to a marital asset of comparable value. This way, they do not lose any value in the agreement, and they may be able to benefit financially from the other asset right now (as opposed to waiting to reach retirement age and then withdrawing the 401(k)’s funds).

What is “comparable value?”

In this context, “comparable value” would be the potential future value of your 401(k). That is after the funds may have grown through investment returns and earned interest. Thus, while you may base your decision to try and retain your full 401(k) on its current value, in reality it may be much more than you anticipate. This may mean that you have to give up more than you expect for the right to keep the entire value of your account.