Navigating the State of Your 401K During a Divorce

Navigating the State of Your 401K During a Divorce


Divorces are rarely an event that leaves either side unscathed. Both parties are in a state of emotional turmoil, their financial situation is in flux, and their possessions are currently in limbo as the lawyers figure out how the property will be divided. As you continue to navigate this difficult transition, certain realities for high-income individuals come to the forefront. They start figuring out how their divorce will impact their financial future, what their retirement assets look like, and how long they might last.

Figuring out how you can continue navigating the state of your 401K during a divorce appears to be a complicated situation on the surface. However, the help of a dedicated Certified Divorce Financial Analyst® in Tacoma, WA, can help make navigating the state of your 401K during your divorce, easier. 

How Do the Courts Usually Split 401Ks During Divorces?

One of the biggest questions people have regarding their 401K after a divorce revolves around how it will get split. Is your soon-to-be ex-spouse entitled to a completely even split? Is there a designated start and end point? In most divorces without a prenuptial agreement, the contents of your 401K are subject to the diversification of assets — to a point. 

Everything you have contributed to your 401K throughout your marriage is subject to being split with your spouse — not necessarily the assets accumulated before your marriage. Additionally, if you both have retirement accounts of equal value, you may decide that the least messy option is to keep your respective accounts and not try to split them up. 

Can I Get Early Access to My Retirement Funds Through My Divorce?

In most cases, the average person can only access their retirement accounts once they retire. If they try to access it early, they will incur a tax penalty. However, divorce allows you to access your 401K or IRA without liability if your spouse is awarded part of the settlement. 

Does My Ex Automatically Get 50% of My Available 401K?

Now that you know your spouse can be entitled to the portion of your 401K that’s been contributed, how will it be distributed? Whether Washington is an equitable distribution state or a community property state significantly affects how your marital assets are distributed. 

Washington is one of the few states that remains a community property state, meaning that couples usually jointly hold their assets as their personal property. Some cases are unique, but for the most part, your 401K should be kept separately. 

What Is a Qualified Domestic Relations Order?

Sometimes, the only way to split retirement accounts like pensions and 401Ks is with a particular court order — a qualified domestic relations order (QDRO.) A QDRO provides the retirement plan’s administrator clear instructions on how to pay the non-employee spouse their fair share of the benefits. 

How You Can Financially Prepare Your 401K for a Divorce

You can take specific steps to protect as much of your 401K as possible during your upcoming divorce. Having a trusted and experienced financial wealth planner in Tacoma, WA, in your corner can help you ensure your financial future after your emotionally charged court appearances. Stolz & Associates, P.S. has helped countless clients navigate the state of their 401K during a divorce and ensure their financial future is secured. 

If you need a consultation with one of our specialists, contact us today!