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

On Behalf of | Jul 2, 2021 | Divorce |

Through research and receiving input from people in Pennsylvania, you may feel completely prepared for any and all aspects of your upcoming divorce proceedings (still understanding that every case is unique). However, one element that many do not anticipate is the division of retirement assets (specifically, your 401(k) account).

Contributions made to your 401(k) during marriage come from marital income (thus making those contributions marital assets). Having to divide up your 401(k) might significantly impact your retirement plans (especially if you are close to retirement). This prompts the question of whether you can keep your full 401(k) in your divorce.

Fighting for your full 401(k)

You can try to keep your full 401(k) in your divorce, but not without some sacrifice on the part of you and your ex-spouse. According to the 401(k) Help Center, keeping your 401(k) requires that your ex-spouse relinquish their interest in it. To convince them to do this, you will likely have to forego your stake in another marital asset of equal value.

Determining whether it is worth it

At first glance, giving up on another marital asset to essentially keep your retirement plans in place may seem like a small sacrifice. However, you should know that when valuing retirement assets, the court estimates their potential future value (after years of potential growth from investment returns and earned interest). If you are close to retirement age, that growth may not be that much more than your 401(k)’s current value. Yet if you are still several years (or even decades) from retirement, it may be significant. This means that you may have to give up much more than you anticipate right now. These factors merit consideration when determining your course of action.