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

Past posts on this blog detailed the role of a Qualified Domestic Relations Order in dividing up your 401(k) in your divorce. Yet the fact that your 401(k) is subject to property division does not change the fact that losing any portion of it may dramatically impact your retirement plans in Pennsylvania.

Thus, you may wonder whether it is possible for you to retain the full amount of your 401(k) during your divorce proceedings. While that may indeed be a possibility, as is the case with many aspects of property division, you should contemplate the implications of such an action before pursuing it.

Retaining your full 401(k)

According to the 401(k) Help Center, keeping your full 401(k) is an option if you are able to convince your ex-spouse to give up their interest in it. Doing so may be easier said than done, as they have multiple options available to them regarding the management of such funds (including the potential of cashing them out). To make your request more appealing, you likely will have to forego your interest in another marital asset in exchange.

Determining what is in your best interest

This is where the decision to fight for your full 401(k) becomes complicated. Any asset you forego must be comparable in value to the amount your ex-spouse relinquishes from your 401(k). That value is the future potential value (meaning how much those funds may be worth after growing through investments and interests). Therefore, while you may assume their interest in the 401(k) to be at its current value, the actual figure may be much higher. This may require you to give up more than you anticipate (depending on how far away you are from retiring). You must then decided whether or not such a sacrifice is ultimately worth it.


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