Past posts on this blog detailed how your 401(k) account becomes subject to property division during your divorce proceedings in Rhode Island. Depending on how close you may be to retiring, this may have a significant impact on your retirement plans. It may also prompt you to question whether there is any way for you to retain the full amount of your account.
Many clients come to us with the same question. There is, yet it is not a decision that you want to rush into. Ultimately, keeping the full amount of your 401(k) may require you to give up much more than you realize.
How to keep your 401(k)
According to the 401(k) Help Center, you can try to keep the full amount of your 401(k), yet doing so will likely require that you relinquish your interest in a marital asset of comparable value. This is where the situation gets tricky.
When considering such a proposal, the court values the assets that your ex-spouse gives up at their future potential value. That is the amount of those funds after years of accumulating interest and generating investment returns. As this almost certainly will be more than the current value of the portion of your 401(k) you owe to him or her, you could potentially have to forgo your stake in an equally valuable shared asset.
What to ask yourself
Is this ultimately worth it? Again, it depends on how close you may be to retiring. If you plan to retire within the next few years, then any estimated future earnings may be negligible. Yet if you are several years away from leaving the workforce, those gains could be significant (thus requiring you to give up more).
You can learn more about property division proceedings by continuing to explore our site