How to Divide a 401k During Divorce in New Jersey

One of the most challenging aspects of navigating a divorce is dividing the assets you built over the course of your marriage. Because couples often contribute together to a 401k fund, it becomes marital property, similar to a shared house or car. Legally, splitting a 401k is a three-step process but there are many tricky aspects that can make finding an equitable split harder than expected. Knowing the facts and following these guidelines can help you to manage the confusion of dividing your retirement fund during a divorce:

The Three-Step Process

Firstly, the division of the 401k must be outlined within the divorce decree. Once this is the case, you or a qualified divorce attorney must draft a second legal document called the Qualified Domestic Relations Order (QDRO) which acknowledges that each spouse has a right to a portion of the money and exactly how much. A family court judge must then authorize and sign the form and it will be checked for state and federal legal compliance.

State Law Determines Rules of Division

In New Jersey, marital assets are not divided evenly, but equitably. The judge will give each party what they think is fair. Some factors judges usually consider during this process include:

  • The length of the marriage
  • Contributions from employers
  • Any generated interest
  • Each spouse’s financial situation and ability to earn income

The QDRO will specify exactly the percentage of funds divided between the parties as well as the formula used to calculate each spouse’s share.

Distributing Funds

The QDRO should also identify the planned method of distributing the funds allocated by the division. Spouses on the receiving end of a 401k division can collect their portion by:

  • Rolling the proceeds into their own retirement plan by requesting a direct transfer, avoiding potential penalties on the collection.
  • Agreeing to defer the distribution until the time that the account owner retires, choosing between lump-sum or recurring payments.
  • Cashing out right away, risking paying income taxes on the collection as well as an early withdrawal penalty.


Preparing a QDRO at the right time is vitally important to ensuring the division of a 401k plan. Because these plans are very complex, simply splitting them within a divorce decree will not effectively distribute the funds. Working with a knowledgeable divorce attorney to create a QDRO right could help you to minimize risk. Contact Moskowitz Law Group today and speak with one of our experienced divorce lawyers to ensure your 401k is divided up fairly after a divorce.

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