One topic that you may not have been prepared to address during your divorce proceedings in Livermore is your 401k. These retirement funds are the result of your own individual effort in your job; why would your soon-to-be ex-spouse be entitled to them? Many come to us here at the Family Law Group LLP have this same question. Like you, they have put a lot of effort into planning their retirement, and are now concerned that those plans now could be financially impacted by their divorces.
The contributions made to your 401k during your marriage come from money considered to be marital income. Thus, those contributions are also deemed to be marital assets. The entire value of your 401k account may not be subject to division; rather, only those contributions are.
The court overseeing your divorce case will issue a Qualified Domestic Relations Order that authorizes your 401k plan provider to make disbursements to your ex-spouse. They may then choose to cash out their portion (divorce is one of the rare instances where an early withdrawal will not result in a penalty) or roll their portion into their own retirement account.
According to the 401k Help Center, however, there may be a way for you to keep the full value of your 401k in your divorce. To do so, you will likely need to relinquish your claim in another marital asset. That asset must be comparable to your 401k’s full value. Keep in mind that value is its future value (taking into account potential growth). You should know then that if you choose to do this, you could be forced to give up on another potentially significant asset.
You can learn more about preparing for divorce proceedings by continuing to browse through our site.