How to protect your 401(K) in divorce?

1 min readLast updated February 23, 2024by Unbiased team

This article takes you through what happens to your 401(k) during a divorce and how you can protect your retirement savings.


  • Former spouses may be entitled to distributions from your 401(k) account. 

  • A qualified domestic relations order (QDRO) determines a 401(k) split in divorce.  

  • There are several ways to protect your 401(k) in the event of a divorce.

  • A regulated financial advisor can help protect your 401(k) and help get your finances back on track after a divorce.

How is my 401(k) split in during a divorce?

Like many Americans, your 401(k) plan is one of your most important assets.  

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However, with almost 50% of American marriages ending in divorce, if you split up, your respective 401(k)s will feature in your financial settlement. This is true if you work out the agreement between yourself and your ex-spouse or the court determines it for you.  

While you own your 401(k), if you get divorced, the financial settlement may include the dividing of your assets, including your 401(k)s, along with individual holdings and jointly held assets.

During a divorce, your 401(k) is divided through a qualified domestic relations order (QDRO).  

How this happens is influenced by the state you live in, especially if you leave the division of your assets to a judge.

If you live in a community property state – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin – the court will divide your marital assets 50/50. If you’ve contributed to your 401(k) since before marriage, the money contributed during that time will not be considered a marital asset.  

If you live in an equitable distribution state – all remaining states - the court will divide your assets in what it determines is an equitable manner. This may or may not be a 50/50 split.

Your finances take a big hit during a divorce. If you’re going through one or you’ve just come out the other end, it’s wise to speak to a financial advisor about how you can rebuild your finances. Unbiased can connect you with a financial advisor in as little as 48 hours. Find an advisor now.

What is a qualified domestic relations order (QDRO)? 

If you get divorced, your assets will be divided with your spouse according to a qualified domestic relations order (QDRO).  

The Internal Revenue Service (IRS) defines this as a decree, judgment, or order for a retirement plan to pay alimony, child support, or marital property rights to a spouse, former spouse, or dependent of the participant, such as a child. 

The spouse who is entitled to receive a portion of the other spouse’s 401(k) in divorce is known as an alternate payee. If you are an alternate payee, you might have several options when it comes to how you receive your money from your spouse’s work-sponsored retirement plan.

These include a share payment option, a separate interest option, or a lump sum option:

  • Shared payments option – If you choose this, each benefit payment that the plan participant receives will be split proportionately between you and your ex-spouse.

  • Separate interest option – Here, the 401(k) account will be divided into two proportionate parts. The plan administrator might put the alternate payee’s share into a separate QDRO account, giving the alternate payee greater choice when it comes to receiving benefits according to their own timetable.  

  • Lump sum – Another possibility is that the alternate payee can take their share as a lump sum, adding it to their own 401(k) or their IRA. 

How long does it take to get 401(K) after divorce? 

How long it takes to get 401(k) after divorce depends on which of the three basic options the spouse on the receiving end of a 401(k) distribution chooses or is awarded by the court.  

One option is to defer the distribution until the account owner retires.

If you choose this option, you can either opt for a lump sum or regular payments. However, if you leave the money in the retirement account, you will need to start taking required minimum distributions (RMDs) from age 70 ½ to avoid penalties. 

Another option is to roll the assets over into your own qualified retirement savings plan. This happens via a direct transfer, and there’s no need for you to pay a penalty.  

A third option when dividing a 401(k) in divorce is to cash out your portion of the balance.

While this offers easy access to money, it can come at a price. If you’re younger than 59 ½ at the time of your payout, you might need to pay a 10% early withdrawal penalty as well as income taxes. 

Speaking to a regulated financial advisor can help you make the best decision for getting 401(k) after divorce. We can connect you with a financial advisor you can trust.

How to protect your 401k in a divorce? 

If you’re splitting up, you’ll want to know how to protect your 401(k) in divorce.

There are several ways to do this. 

  • You can gather evidence that helps you to keep more of the money in your work-sponsored retirement plan. For example, if you contributed money to your plan before your marriage, this cannot be subject to division during your divorce.

  • If you have something other than the money in your 401(k) to offer to your spouse when negotiating a divorce settlement. While this means you will lose that asset, it may result in you keeping more of the money that is within your plan.

There are also ways to rebuild your 401(k) after divorce, including:

  • Make a few lifestyle changes to cut back on spending so you can contribute more money to your 401(k).

  • Sell assets and put any profit back into your 401(k).

  • You can also think about how close you are to benefiting from Social Security (age 62).

While you might not be able to prevent your ex-spouse from getting some of your 401(k) money, but with the right guidance and choices, you can put money back into your retirement plan after you get divorced. 

A qualified and regulated financial advisor is best placed to guide you through the financial aspects of divorce. From protecting your retirement savings to rebuilding your financial plan, they can help you get back on track. Find an SEC-regulated financial advisor with Unbiased.

How does dividing a 401(k) during divorce affect my taxes? 

QDROs are not subject to the 10% early distribution penalty tax that normally applies to distributions to 401(k) plan participants younger than 59 ½.

This tax exemption applies to early distribution from the 401(k) plan only, although these funds will still be subject to federal and possibly state income tax. 

For alternate payees, if they choose to roll over their share of a 401(k) into their own 401(k) or IRA, this can be done tax-free. They will only incur taxes when they start taking distributions.

If they choose to cash out some or all of the amount, they will incur income tax but will not incur the 10% tax penalty.

Get expert financial advice

Considering the significance of a work-sponsored retirement plan as an asset, it’s important to understand how it could be shared with your former spouse.  

It’s also crucial that you know the various options and potential tax implications of 401(k) and divorce. While you can’t necessarily withhold all your 401(k) money from your ex-spouse, you can protect it

Working with an SEC-regulated financial advisor can help you navigate through a divorce 401(k) split.

 In addition to offering helpful advice, an advisor can help you create a bespoke plan for financial recovery after your divorce is finalized. Unbiased can help you find the best financial advisor for your needs.

Get matched with an advisor here.

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Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.

Need help rebuilding your finances after divorce?

A financial advisor can help you get your finances back on track.