A divorce can do a lot to upend your plans for the future, including your strategy for your retirement. If you have been building up your 401(k) during your marriage, a divorce court will likely look at your account as marital property. You could end up losing a portion of your 401(k) to your spouse.
However, a split of your 401(k) is just a possible outcome. The Motley Fool describes three different fates for a 401(k) in divorce.
You keep the full 401(k)
If you and your spouse each possess 401(k) accounts with almost equal amounts, it will probably not be necessary to divide your account. However, if you own a substantially larger 401(k) than your spouse, you might consider trading other property to your spouse in exchange for retaining your full account.
You divide your 401(k)
If you must split your 401(k), you will need a qualified domestic relations order issued by a court. This grants your wife or husband the legal right to some of your 401(k) funds. A QDRO usually divides a 401(k) into two separate accounts, one for you and one for your spouse.
You roll over your 401(k)
It is possible you could take your 401(k) money and roll it into an IRA. From there, you may roll a portion of the funds into a second IRA for your spouse. This option is generally available to people who have left a job or have a 401(k) plan that allows for rolling over money into an IRA.
An IRA rollover might only cost you a slight fee. Fortunately you do not pay taxes until you begin taking out money for retirement. Figuring out how to minimize your tax load and other fees is an important step in deciding the fate of your retirement accounts.