Can you keep your 401(k) in your divorce?

On Behalf of | Feb 16, 2021 | Divorce |

Past posts on this blog touched upon the fact that your 401(k) account becomes subject to property division during your divorce proceedings. You might go into your divorce proceedings assuming that the only impact it may have on your retirement is changing the person that you will spend those years with. Yet given that your 401(k) account will likely be one of the primary sources of income during your retirement, you may rightly have concerns over how dividing it up during your divorce impacts your current plans.

This may prompt you to question whether you have the option to retain the full amount of your 401(k) in your divorce. You can, but such an action does come at a cost.

Fighting for your full 401(K)

According to the 401(k) Help Center, keeping your full 401(k) requires that you convince your ex-spouse to relinquish their stake in the contributions made to your fund during your marriage. To do this, you likely will have to give up your stake in another marital asset in exchange. For the court to accept your proposal, that asset will have to have comparable value to the amount you ask your ex-spouse to give up.

Determining what is in your best interest

Before fully committing to this course of action, however, you should consider whether it is ultimately in your best interest. The court values your ex-spouse’s stake in your 401(k) at its potential future value (after years of growth from investment returns and earned interest). That means that you may have to give up much more right now than you anticipate. Depending on how many years away you may be from retirement, you might want to consider whether the immediate financial sacrifice merits the benefit of keeping your retirement plans intact.

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