As you prepare for your divorce proceedings in Schenectady, you should have an inventory of every asset that is subject to property division. One that you may have forgotten to include (like many do) is your 401k. Specifically, family court officials view the contributions made to your 401k during your marriage (as they come from marital income) as marital assets.
This prompts the question of how the court divides those funds. There are actually a number of different options to choose from.
Dividing up the 401k
You can choose to simply split your current 401k into two separate accounts (with the portion owed to your ex-spouse rolled over into their own account). This is what many tend to prefer, as it offers both sides individual control over their investment strategies going forward. If your spouse already has their own retirement account, they can also choose to simply transition their portion into that. To do so, the court issues a Qualified Domestic Relations Order authorizing your 401k plan provider to make a disbursement to an alternate payee.
With a QDRO, your ex-spouse (as well as you) has the option of cashing out their portion of the contributions. Typically this will result in an early withdrawal penalty. Yet divorce is one of the few cases where a person can take a disbursement without incurring a penalty.
Keeping your full 401k
The 401k Help Center also offers another suggestion: Keeping your full 401k. To do this, you would have to convince your ex-spouse to forgo their claim to the marital contributions. That would (more than likely) require that you relinquish your interest in a marital asset of comparable value in exchange. Whether this would be in your best interests depends largely on the asset you would have to give up.