As you assess your future following the completion of your divorce proceedings in Illinois, you no doubt begin to look forward to the division of your marital assets and how that will impact your financial situation going forward. One important aspect of this is the division of your 401(k).
The fact that your 401(k) is subject to property division may come as a surprise to you. Yet given that the contributions made to that account during your marriage come from marital income, the court deems them to be marital assets. Once you understand this, your next concern likely turns to the division of your account.
Equittable division of a 401(k)
The court will typically mandate that your 401(k) plan provider divide your account into two separate funds (with both you and your ex-spouse then gaining control over your respective funds). While this may be the traditional way to deal with a 401(k) account in a divorce, its impact on your retirement plans may prompt you to wonder if there is a way for you to retain your full account.
The pros and cons of keeping your full 401(k)
According to the 401(k) Help Center, you can try to keep your full 401(k) account in your divorce by relinquishing your claim to another marital asset in exchange for your ex-spouse giving up their stake in your 401(k). The main advantage of this is that you can minimize your divorce’s impact on your retirement plans. The drawback, however, is that you may have to give up more than you anticipate. This is because the court values the assets your ex-spouse gives up in this exchange at their potential future value (after years of potential gains from investment returns and interest).