Can I Split a 401(k) With My Wife?

by Ashley Mott

The major life events of divorce and death may lead to a person needing to claim a portion or all of the 401(k) funds his spouse contributed to an individually owned account. In many instances, the splitting of 401(k) funds becomes a necessity or preference as part of the division of marital assets.

Qualified Domestic-Relations Order

A qualified domestic-relations order (QDRO) is a legal document signed by a judge. A QDRO can cover property settlements, child support agreements, alimony payments and the rights to marital property, including the right to a marital partner's benefits. A QDRO often separates assets such as 401(k) plans on a percentage basis versus a cash basis to ensure both parties retain the risks and benefits of an asset in equal measure. If a husband possessed the same 401(k) prior to marriage and during his marriage, the contributions to the plan prior to marriage will be viewed as non-marital property and only the funds contributed post-marriage are split as a marital asset.

Rollovers and Penalties

When a wife or husband receives a percentage of a split 401(k), the funds do not have to be removed from the plan. However, many divorcees find rolling the 401(k) funds into an individual retirement account (IRA) to be a better option. Taxes on the funds remain deferred, no penalties are assessed, and additional contributions can be added to the IRA to augment the retirement funds split in the divorce. Should the wife choose to disburse her portion of the 401(k), the traditional 10-percent penalty may be waived one time, but full income taxes must still be paid.


Husbands can set up a wife as the beneficiary of a 401(k) without disbursing and splitting the funds within the account. When you open a 401(k), list your wife on the beneficiary designation form. In the event of your death, the account passes to your wife. She may disburse the funds without a 10-percent penalty but will still have to pay income taxes unless the fund was a Roth 401(k).

Solo 401(k)

Owner-operated businesses or partnerships owned by a married couple can contribute to solo 401(k) plans created to assist the self-employment with retirement planning. Both an owner and a spouse can contribute to a solo 401(k) plan provided the spouse is listed on the payroll or as a partner. As of the time of publication, the solo 401(k) contribution maximum of $49,000 doubles to $98,000 for owner and spouse operated businesses, provided the income generated by the business supports the contribution amount. Because the solo 401(k) allows both spouses to contribute based on self-employment earnings, no splitting of the plan is necessary.

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