As you prepare for your divorce proceedings in Texas, you truly begin to contemplate what your life may be like without your soon-to-be ex-spouse. The realization that the person you once believed you would grow old and retire with will change. Once you get into the actual process itself, you also quickly realize that will likely not be the only impact on your retirement.
Divorce also involves the division of your marital assets (a category which you probably do not believe your 401(k) falls into). Yet retirement accounts (or more specifically, the contributions made to those accounts during your marriage) do qualify as shared assets. This inevitably prompts the question of how the court divides your 401(k) (and whether keeping its full amount may be an option).
Dividing up a 401(k) in a divorce
In most cases, the court issues a Qualified Domestic Relations Order in your case. This authorizes your 401(k) plan provider to issue a disbursement to an alternate payee (in this case, your ex-spouse), which opens the door for the provider to divide your account into two (with your ex-spouse then assuming investment control over their respective share).
Keeping your full 401(k)
According to the 401(k) Help Center, keeping your full 401(k) is an option. To do so, you need to convince your ex-spouse to forego their stake in the account’s marital contributions. This will likely require that you relinquish your interest in a marital asset of comparable value. Before you commit to this action, however, you should know that the court values your ex-spouse’s share of your 401(k) at its potential future value. This may mean that you must give up much more right now than you anticipate (especially if you are still several years from retirement).