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

On Behalf of | Jan 20, 2021 | High-asset Divorce |

Your divorce proceedings in Mississippi will inevitably throw your a few proverbial curveballs you do not anticipate. One of these may be the impact it has on your retirement. You may think the only change is the person with whom you will spend those years. Yet that is not the case.

Your 401(k) (or least, a portion of it) is subject to property division due to the contributions made to it during your marriage come from marital income. Once you understand this, your next question then becomes how the court divides up your account during property division proceedings (and perhaps, whether you could potentially retain its entire value).

Keeping your full 401(k)

Typically the court issues a Qualified Domestic Relations Order mandating that your 401(k) plan provider divide the account into two separate funds (reflecting the value of the marital contributions). According to the 401(k) Help Center, however, you can attempt to retain your full 401(k) by convincing your ex-spouse to forego their claim to those assets. To do so, you likely will need to relinquish your claim to another marital asset of equal value in exchange.

Weighing the pros and cons of the decision

Keeping your full 401(k) in your divorce mitigates its impact on your retirement (thus allowing you to maintain your current retirement plans). However, you should remember that the court values your ex-spouse’s portion of your 401(k) at its future value (after potentially years of growth through earned interest and investment returns). This may force you to give up more right now than you anticipate. Depending on how many years you are away from retirement, you should consider which decision will require the greatest financial sacrifice.