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Keeping the full value of a 401k

As people in Roswell head into their divorce proceedings, they may conflicted as to how to handle the division of their 401k accounts. The contributions made to such accounts during a marriage are considered to be marital property, and thus subject to property division. Yet some may want to retain the full value of those accounts in order to stay on track to meet their individual financial goals once they reach the age of retirement. Is that possible? 

The law removes many of the barriers that exist to profiting from a 401k during a divorce. For example, 401k account holders typically face a stiff tax penalty if they choose to withdraw funds prior to reaching the age of retirement. Yet according to information shared by CNBC.com, when a court issues a Qualified Domestic Relations Order during a divorce case, an alternative payee to a 401k account can withdraw their portion without taking a penalty. Thus, a non-contributing spouse may be incentivized to keep their portion of a 401k. 

The 401k Help Center recommends that those who want to retain the full value of their 401k's in a divorce consider relinquishing their claims to other marital assets in exchange for their spouse's agreeing not to go after their retirement accounts. This is not a decision that one should take lightly, however. Whatever asset one gives up must be comparable in value to their 401k. That includes the projections of future earnings that a non-contributing spouse might earn by rolling their portion over into their own retirement account. This means that one is not valuing their 401k at its current value, but at that which it might achieve when they retire. This could require giving up their claim to a valuable asset right now, such as their stake in the marital home. 

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