When separating couples in Knoxville come into their divorce proceedings, many are unaware that their 401ks are subject to property division. This typically prompts questions from both sides. The party that has been contributing to the 401k account usually wants to know how they can avoid having to split it, while the one entitled to a portion of the contributions asks if it is possible to access those funds right now.

If one pulls funds from a tax-deferred retirement savings account prior to reaching the age of retirement, they typically are assessed a hefty fee (up to 10 percent of the total distribution amount. Yet according to information shared by CNBC.com, divorce is one of the rare cases where that fee can be avoided. If one does choose to pull the portion of the 401k contributions due to them as part of a divorce, they will still have to pay income taxes on what they receive. They also need to consider the potential benefit of rolling that money into their own retirement account. Doing so opens up the potential for it to grow even more through investment earnings and interest.

The contributing spouse may be less than thrilled at the prospect of having to part with any portion of their 401k (as doing so might alter their plans for retirement). The 401k Help Center offers the suggestion that if one wants to retain the full value of their 401k in their divorce, they should consider relinquishing their claim to another asset. Again careful thought should be given to this decision, as the value of their 401k will not be judged at its current value, but rather its future value. Thus, one may be giving up more than they bargained for by insisting on keeping their full 401k.