Divorce means suffering both emotionally and financially. Besides heartbreak, your money gets divided too. Funds contributed to the 401 (K) account tend to get divided between the couple after a divorce.
For example, if you have contributed around $100,000 to the retirement plan, your spouse will own 50% of it after divorce. The amount that your ex gets varies from state to state. However, most of the state believes in dividing the funds equitably.
Not many people are comfortable in splitting their retirement savings with their ex. Fortunately, there are ways by which you protect your 401 (k) as much as possible. Here’s how :
#1 Hire an Experienced Attorney
Retirement security, when not managed precisely, could make you lose more. You could end up allocating more of your 401 K to your spouse. That’s why it’s best to hire a professional divorce attorney with experience in handling such situations.
These attorneys know their jobs and the applicable laws of the process. Regardless of your profession, they could confront the case and protect your finances. They will monitor your situation and provide you with solutions accordingly.
#2 Reach the Court
You could reach the court if you have made an agreement covering your 401 (k) before marriage. That way, the judge will divide the retirement savings.
Keep note that if your spouse has added any funds to the retirement account, they have the right to declare the money. Similarly, you can take any money submitted in the retirement savings of your spouse.
#3 Negotiate With Your Spouse
An alternative could be negotiating the retirement savings with your spouse. Here, you will have your personal control over the matter.
Both you and your spouse could maintain a cooperative atmosphere and make their own regulations. You could ask them to take something else instead of the money from 401 (k).
While it may seem an effortless strategy, not many couples are on the same page.
Conflicts and disputes are a common problem in this case. Likewise, if you reach the court, a judge will review the agreement with impartiality.
#4 Other Options
It may not be possible to keep the entire 401 (k), but there are ways to keep a majority of the amount. In fact, you can also refill your retirement savings in certain ways. This includes
- You can sell your home
- You can let me know how close you are to social security
- You can look for proof that favors keeping more money in your pocket
- You can implement lifestyle changes and add the money to your 401 (k) account.
Make sure to take help from an attorney, if you want to know how assets are split in divorce.
What is a 401 (k) Divorce Cash Out?
People who have filed for divorce may require money for a new house or relevant expenses (till they are unemployed). Thus, they could take some amount from their ex-spouse’s retirement account to meet the costs.
There is a penalty charge if the money is withdrawn by a person below 59.5 years of age. However, QDRO or qualified domestic relations order can help to divide the share amount without penalty.
Can I Cash Out the 401 (k) Before Divorce?
If you have filed for a divorce, you are not allowed to get rid of the retirement account, as it falls under marital assets. Even if you do, your spouse could still ask for their savings share. You can cash out the 401 (k) at your convenience; however, people below 59.5 years of age had to pay a penalty of 10%.
Try implementing these tips to protect your 401 (k) during a divorce. Keep note that you are not allowed to legally hide 401 (k) assets during a divorce. You will be asked to disclose the truth, and thus, hiding a bank account would be a crime.