Deciding how to divvy up your 401k can easily become one of the most complex issues in your divorce. Depending on how long you (and your employer in Stockton) have been contributing to it, there could very well be a significant amount of money in there already. It may be difficult to sell your ex-spouse on the virtue of being patient with such an account, and he or she may want whatever portion of it they are owed through your divorce agreement right now. This dilemma illustrates why the American Academy of Matrimonial Lawyers lists dividing retirement and pension accounts amongst the top three most contentious issues dealt with during divorce proceedings. So how should you handle such a situation? 

Most everyone understands that taking an early withdrawal from a tax-deferred retirement savings account can result in significant penalties (in the case of a 401k, that can be as much as 10 percent). That penalty is assessed against you (the account holder). You can try to secure a Qualified Domestic Relations Order, which could allow you to withdraw from the account without having to pay the penalty. However, unless the language of the QDRO specifically states that is your ex-spouse’s intention, the plan administrator can choose to deny the request. You could simply make the withdrawal without the QDRO, yet if you do, you will want to attach some stipulation that your ex-spouse cover all or a part of the penalty. 

A better way may simply be to try and retain the full value of your 401k for yourself. To do this, however, you would likely have to relinquish your claim to other marital assets as a trade-off.