People spend most of their lives working toward retirement. Millions of Americans contribute to retirement accounts provided by their employers, one of the most popular of which is a 401(k) plan. A 401(k) is a retirement account that employees can contribute to with a portion of each of their paychecks. Employers can match employee contributions or contribute a percentage as an added benefit. But what happens to a 401(k) account if a couple gets a divorce? Continue reading and contact an experienced Mountainside property distribution attorney to learn more.
Are Retirement Accounts Divided During a Divorce?
When people think about the division of assets in a divorce they probably consider a family home, cars, furniture, artwork, and more. An important subject that needs to be addressed but may not be immediately obvious is retirement accounts. Depending on how long an employee has been contributing to their retirement account it could contain a significant amount of money which is subject to property division.
Retirement accounts, including 401(k)s are divided during a divorce given that the money is classified as marital assets. Marital property is any asset acquired jointly or during the marriage. If the employee spouse contributed money before the marriage or relationship that portion can be considered separate property and will not be split.
Is New Jersey an Equitable Distribution State?
New Jersey is what is known as an equitable distribution state. This means that during a divorce assets will not be split down the middle with 50% being awarded to each spouse. A court will determine what percentage split is fair, taking into account each spouse’s income, earning capacity, debts, contributions to the marriage, and more.
Can I Keep My 401(k) Account During a Divorce?
All marital assets are subject to be divided between each spouse, so it can be difficult to retain the full amount of your 401(k). While you may believe you should retain the account in its entirety, your spouse is entitled to a portion of it. There may, however, be steps you can take to minimize your losses from the account.
Make sacrifices in other areas of the divorce. Your 401(k) is important to you. Consider what is important to your spouse. Do they have an affinity for a certain car or piece of property? Can you compromise and offer them something else in exchange for the rights to your retirement account? Be willing to negotiate.
Prepare for the loss. If you know that your spouse is going to be awarded a portion of your 401(k) account take steps to prepare for this fact. You can begin saving up funds to deposit back in the account to make up for the loss. Keep in mind that you will also receive assets during the divorce, like cash from the sale of a family home or other property. You can use these assets to build your retirement fund back up.
