You may be prepared to tackle a number of different subjects as your divorce proceedings approach in Germantown; dividing up your 401k may not be one of them. Many in your same situation have asked us here at The Waldrop Firm, P.C. why their 401k’s would be included in property division proceedings. You may share the same question. After all, your plan likely comes through sponsorship from your employer, and since the work you do is your individual effort, you may assume that the fruits of that labor (your 401k included) would be viewed as yours as well.
What is lost in this assumption is the fact that whatever assets you retain during your marriage are considered shared property. This includes your income, and as contributions to your 401k come from those funds, those contributions are deemed to be shared as well. Yet according to the 401k Help Center, there may indeed be a way for you to retain your full 401k in your divorce. You simply would need to offer your ex-spouse the incentive to relinquish their claim to their portion of your 401k by giving up your ownership stake in another marital asset of equal value.
At first glance, this may seem like an easy decision. Yet one thing to consider before pursuing this course of action is that the amount of your 401k that your ex-spouse is entitled to is determined at its future value. If you are still years away from retirement, that money can generate added value through investments and earned interest. Thus, the asset that you are forced to give up to keep your 401k might currently be more valuable than whatever portion your ex-spouse was entitled to.
More information on dealing with property division can be found here on our site.
