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Keeping your full 401(k) in your divorce

On Behalf of | Dec 28, 2020 | Divorce, Family Law |

Entering into your divorce proceedings in Connecticut, you may feel prepared for any potential issue that may arise. Such are the feelings of many of those that we here at the Prince Law Group, LLC work with, yet one issue they often express surprise upon learning is the fact that their 401(k) accounts are subject to property division.

After a careful analysis, the division of your 401(k) account (or at least a portion of it) may make sense (after all, the contributions made to your 401(k) during your marriage come from marital income). Yet that likely does not make actually facing the potential of it happening any easier. This may prompt you to question whether it may be possible to retain your full 401(K).

Giving up your stake in another marital asset

According to the 401(k) Help Center, keeping your full 401(k) in your divorce is possible. To do so, however, you likely will have to relinquish your interest to another marital asset of equal value. Such an exchange may make the decision to give up their claim to a portion of your retirement account more palatable to your ex-spouse.

Determining what is in your best interests

This may seem like a small sacrifice to you, yet such a decision deserves a good deal of thought. When you ask your ex-spouse to forego their interest in your 401(k), the court values their portion at its potential future value (after years of growth from investment returns and earned interest). Thus, the amount you may have to forego right now may be much more than you anticipate. Exactly how far away you are from reaching retirement age should factor into your decision to fight to keep your full 401(k).