401k vs. IRA: How They Differ When Dividing Retirement Accounts in Divorce

Understanding the Differences When Dividing Retirement Accounts in Divorce

Dividing retirement accounts in divorce plays a major role in protecting your financial future. Two of the most common accounts involved are 401k plans and IRAs. Although both help individuals save for retirement, they follow very different rules during divorce proceedings.

Dividing 401k Accounts in Divorce: What You Need to Know

A 401k is an employer-sponsored plan. Employees contribute a portion of their salary, and many employers offer matching funds. As a result, these accounts often grow significantly over time. To divide a 401k during divorce, the court must issue a Qualified Domestic Relations Order (QDRO). This legal document instructs the plan administrator to transfer a portion of the account to the former spouse without triggering taxes or early withdrawal penalties.

Dividing IRAs in Divorce: Key Differences from a 401k

An IRA (Individual Retirement Account) is opened independently, rather than through an employer. It offers more flexibility in investment choices; however, contribution limits are lower and there are no matching contributions. Unlike 401ks, IRAs do not require a QDRO. Even so, divorcing couples must still follow IRS rules carefully to avoid unnecessary taxes or penalties when transferring funds.

How Larsen Law Helps with Dividing Retirement Accounts in Divorce

At Larsen Law, we guide clients through the legal and financial steps of dividing retirement accounts in divorce. Our team drafts QDROs, ensures IRS compliance, and advocates for fair and accurate division of both 401ks and IRAs. Additionally, we focus on preserving your long-term financial stability as you navigate this difficult transition.

If you’re unsure how to divide your 401k or IRA during a divorce, we are here to help. Contact Larsen Law today to protect your retirement and move forward with clarity and confidence.