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Dividing up a 401k

On Behalf of | Jan 5, 2020 | Firm News |

Every person seeking a divorce in Chicago goes in prepared to work through their property division with their ex-spouse; not every person, however, anticipates that their 401k’s will be included amongst their marital assets. Yet as contributions made to a retirement account during a marriage typically come from marital income, they are considered to be shared assets. 

Per the 401k Help Center, the most common solution to dealing with 401k division during a divorce is to roll the portion of the contributions due to the non-contributing spouse into their own retirement account. This allows those assets to continue growing for their benefit, and offers those receiving them the opportunity to build on them with their own contributions. 

Those contributing to a 401k may not wish to part with any portion of their retirement savings due to the impact that might have on their retirement plans. For anyone who might fall into this group, the 401k Help Center offers this proposal: consider relinquishing their claim in another marital assets (of comparable value) in exchange for their ex-spouse giving up any right to any portion of their 401k. This is a decision that should not be taken lightly, however, as the worth of the 401k is determined at its future potential value and not its current balance. Thus, one may be forced to immediately give up their stake in another valuable marital asset. 

One due a portion of their ex-spouse’s 401k may be tempted to cash it out, yet at the same time concerned that doing so might net them an early withdrawal penalty. According to information shared by, divorce is one of the few instances where withdrawals can be made from a retirement account without incurring a penalty.