Protecting retirement funds during a divorce requires planning on both sides.

During a divorce, retirement funds such as 401ks, IRAs and pensions are divisible between both parties. However, one person is commonly left with most of the taxes and fees associated with withdrawing these accounts. To save money and protect your share of your retirement fund, think ahead: Make informed financial decisions when getting married and dividing property during divorce.

401k Division

Negotiate a qualified domestic relations order (QDRO), which details the percentage of assets the alternate spouse will receive during a divorce. Each party should get a lawyer to handle the process, which, according to CBS Money Watch, can be expensive. The QDRO outlines every detail of the 401k split so the account administrator can complete the transaction accurately.

Decide, with your legal counsel, what's best for you when negotiating the division of assets. If you are a doctor, for example, you'll want to keep your retirement fund intact in case a medical liability lawsuit arises in the future. This might cause you to offer something else in its place, such as a stock portfolio or the house. Trial and error, along with rigorous negotiation, will eventually render a basically fair result.

Make a one-time withdrawal for your part of the retirement fund and avoid the 10 percent fee if you are the alternate spouse. According to MSN Money, you are entitled by law to a one-time withdrawal before age 59 1/2. However, you must pay income taxes associated with the fund.

Attempt to give the other party a settlement that benefits him without cleaning you out. Looking out for the other person's best interest, despite how at odds you are with him, will result in a better settlement for you. Revisiting the doctor example, if you know your spouse might eventually face a medical lawsuit, settle on taking a house or a more liquid investment, such as stocks. Divorce negotiations are give and take -- just like marriage -- so prioritize your financial desires with the lawyer and compare yours to your spouse's.


  • Set up a prenuptial agreement with your spouse before getting married or a postnuptial agreement if already married. Include terms that cover adultery, guardianship and the division of assets in the case of a mutual parting. These terms can cover anything you want, and getting them out of the way can save you hassle down the road. This requires hiring a lawyer for each person to draft the terms.