Divorcing couples in Reading likely anticipate having to battle over a number of issues; who gets the 401(k), however, may not be an argument they expect to encounter. Yet as contributions made to such an account during a marriage come from marital income, it is thus a marital asset.
As such, both parties typically share an equal stake in it (that is to say an equal share in those marital contributions). The question then becomes what it is the best way to deal with the division of a 401(k) account during a divorce.
Keeping the full 401(k)
Plan holders may argue against dividing it all. Those who wish to keep the full amount of their 401(k) accounts may do so (though not without some maneuvering). According to the 401(k) Help Center, they would simply need to relinquish their claim to a marital asset of comparable value in exchange for their ex-spouse giving up their interests in the 401(k). This may seem to some to be a proverbial “no-brainer,” yet it is not a decision that one should make hastily. The court does not value a non-contributing spouse’s stake in a 401(k) at its current value, but rather the future value it may obtain through growth from investment returns and interest. This means the spouse asking to keep their full 401(k) may have to give up more than they bargained for.
Other options for handling a 401(k) in a divorce
Many divorcing couples simply choose to divide the contributions subject to division equally and roll those due to the non-contributing spouse into their own retirement account. One may also simply cash out their portion; per the website CNBC.com, divorce is one of the few cases where one can make an early withdrawal from a 401(k) account without incurring a penalty.