How to Protect Your 401(k) In a Divorce

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 15, 2024

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How Are 401(k)s Split During a Divorce?

The 401(k) of a divorcing couple can be split depending on several factors including:

  • including where they live,
  • the balance of each 401(k),
  • how the government taxes the 401(k), and
  • the value of other marital assets.

Marital property is divided equitably in most states, which implies that marital property must be split equally unless there are exceptional circumstances.

In a divorce, marital assets must be divided 50/50 under community property rules.

This means that any money you deposit into your 401(k) before marriage is not considered marital or community property and isn't subject to division in a divorce.

A court may order one spouse to give some of his or her money to the other if the one with more savings has significantly more money.

But that does not necessarily imply that you must liquidate your 401(k) and give part of it to your ex.

Have questions about 401(k) plans? Click here.

How to Protect Your 401(k) In a Divorce

401(k) accounts are a great tool for retirement savings.

If you have a 401(k) and you get divorced, or if your soon-to-be ex has one, knowing how to protect your 401(k) can be vital to ensuring a successful outcome.

Your main concern in a divorce should be covering all of your living expenses.

You don't want to end up in a situation where you have to raid your retirement savings in order to make ends meet.

To protect your 401(k), you'll need to take a few steps:

1. Keep the account in your name.

If the account is in your name, your ex can't touch it without your permission.

However, if you're still employed with your company, don't remove the money.

Keep it in your account until you retire or leave the company.

2. Consult an attorney.

Your attorney can help you transfer ownership of the account to your spouse while avoiding taxes and penalties.

This is known as a Qualified Domestic Relations Order (QDRO).

3. Keep a receipt.

If you move the 401(k) out of your name, be sure to keep a copy of the plan's Summary Plan Description (SPD) and a record of where the 401(k) is now.

This way if your ex-spouse makes any claims later on, you have proof that the account is no longer in your name.

What Happens if You Don’t Take Steps to Protect Your 401(k)

If you don't take steps to protect your 401(k) in a divorce, your ex-spouse could potentially drain it or use it to pay off their own debts.

This could have a serious impact on your retirement savings. By taking the steps outlined above, you can help ensure that your 401(k) goes towards your golden years.

What Is 401(k) Hardship Divorce Withdrawal?

If you are ordered by a court to give money to your ex-spouse or children, you can withdraw funds from your 401(k) without paying the 10% penalty fee if you qualify for a hardship withdrawal.

Should You Stop Contributing to a 401(k) During Divorce?

Whatever you decide, you'll need to verify your plan to see whether you can modify your plan enrollment status or contribution amounts within the time frames provided.

Some people find that stopping retirement contributions when a divorce is being prepared helps them to save money on attorneys' costs.

However, keep in mind that whatever you spend after the date of separation is likely to be your separate property.

Who Can Help You With This Process?

If you need assistance protecting your 401(k) in a divorce, consult an attorney.

They can help you transfer ownership of the account to your spouse while avoiding taxes and penalties.

This is known as a Qualified Domestic Relations Order (QDRO). Attorneys typically charge by the hour, so be sure to get an estimate before hiring one.

The Bottom Line

To learn more about protecting your 401(k) in a divorce, consult an attorney.

While you can transfer the account to your spouse without penalty, be sure to get help if you're not familiar with transferring assets.

This way, you can protect yourself during what is often an already stressful time.

Protect Your 401(k) In a Divorce FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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