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I have a friend of mine (really) who got divorced some time ago. His wife cleaned him out and it has taken him a couple of years to get halfway normal again. It came up in conversation that she even gets a percentage of his 401K when he retires (40%)! but she only gets money calculated between the time they were married and the divorce date. I suggested that he ask his lawyer about rolling his current 401K into an IRA and just let it draw interest,and start another 401K and increase his payments to himself to offset the shorter amount of time. We are still talking 23 years and I just cant see paying this woman all that money if you dont have to. Cut his losses, and start over. I cant wait to hear what the Fools have to say about this one!!! All advice will be forwarded to my poor friend. Thanks.
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A 401(k) account is a marital asset & the wife is typically entitled to a portion of it as of the date of divorce. The most frequent manner to handle this, which is easier than your solution is to have either lawyer draft a "qualified domestic relations order" QDRO and serve the QDRO on the plan administrator (PA). The PA is legally bound to honor the QDRO which will result in the account being valued as of the date of divorce (let's say $100,000) & the PA then opens an account within the plan for the wife and moves $40,000 into it even though the wife has never been employee. Then both ex-husband & ex-wife go their seperate ways with thier own accounts.

In this manner both parties independently manage thier own accounts and further, future employer & employee contributions to his account & earnings thereon proceed unencumbered.

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2 other things unless your friend is changing jobs he can't just start another 401k account.
and is it worth $1.50 to give his ex a dollar less??
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I've never heard of such an arrangement. He should have computed her share, got a QDRO in the divorce, and just given her her share. Then he wouldn't have to deal with her again.

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