You likely already know going into your divorce proceedings in Arizona understanding that the assets you and your soon-to-be ex-spouse accumulated during your marriage. One such asset that you may not expect to be among these is your 401(k). Yet given that contributions made to a 401(k) during a marriage come from marital income, family courts consider them to be marital assets.
Having to divide up your 401(k) may dramatically impact your current retirement plans (as you may anticipate that account being one of the primary sources of your retirement income). Thus, you may want to know whether keeping your full 401(k) in your divorce proceedings is an option.
Convincing your ex-spouse to give up their stake in your 401(k)
According to the 401(k) Help Center, it is, yet not without a cost. To retain the full amount of your 401(k), you need to convince your ex-spouse to forego their claim to the portion of the contributions made to the account during your marriage. Doing this will likely require that you relinquish your stake in another marital asset of equal value. In comparison to your retirement plans, this may seem like a reasonable sacrifice to absorb right now.
Considering the drawbacks
That sacrifice, however, may end up being much more than you anticipate. When you ask your ex-spouse to forego retirement assets, the court values them at their potential future value (after potentially years of returns from investments and interest). This may mean that the amount you must give up in the immediate will be much more than the amount of money from your 401(k) your ex-spouse would receive. You should consider which of these options would ultimately be best for you financially.