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Keeping your full 401(k) in your divorce

On Behalf of | Jan 12, 2021 | Divorce |

Your divorce will certainly bring about a number of changes in your life in Colorado, yet one you may not anticipate (just as many of our past clients here at the Pearman Law Firm, P.C. did not) is the division of your 401(k).

The contributions made to a 401(k) account during a marriage come from marital income (thus making those contributions marital assets). Therefore, the court will often divide up your account into two, with you and your ex-spouse then gaining investment control over your respective accounts. However, dividing up your account may have a dramatic impact on your retirement plans. This may prompt you to try to retain your full 401(k) account in your divorce.

Can you keep your full 401(k)?

The 401(k) Help Center states that you can attempt to keep your full 401(k). To do so, however, you need to convince your ex-spouse to forego their stake in your 401(k) funds. Doing that will likely require that you give up your claim to another marital asset of equal value to incentivize them to agree with your request.

Is keeping your full 401(k) worth it?

This may seem like an easy decision, yet as is the case with any decision related to your divorce, it is not one you should rush into. Consider first that the court values the portion of your ex-spouse’s 401(k) at their potential future value (following years of returns from investments and interests). This means that the amount you must give up now may be much more than you anticipate. You should weigh this potential against the benefit of retaining your full 401(k).