My spouse was awarded $90,000 from my 401(k) in our divorce. How is that fair?

By Quentin Fottrell

'I retired in 2020 and subsequently went through a divorce a few years later'

"Earlier in my career, while I was still working, I went through another divorce. I was able to replenish the funds distributed from my retirement plan on a pretax basis." (Photo subject is a model.)

Dear Quentin,

I retired in 2020 and subsequently went through a divorce a few years later. As part of the division of assets, approximately $90,000 was awarded to my ex-spouse from my 401(k). Is this normal, and does that kind of arrangement sound fair to you?

Earlier in my career, while I was still working, I went through another divorce. I was able to replenish the funds distributed from my retirement plan on a pretax basis, in addition to making my regular contributions. Is it possible to do something similar now that I am retired?

Happily and Unhappily Divorced

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

Related: My wife says we can't afford to retire. I vetoed her $8,000 trip to Italy. We're in our 60s and have $4 million. Do I keep working?

Life will be easier for you if you make peace with the outcome.

Dear Divorced,

You hit on something that comes up a lot in divorce: fairness versus acceptance.

The former is adjudicated by the judge in the proceedings. They make their ruling using the letter of the law - evaluating marital property and what the lower-earning spouse contributed to the marriage. In recent weeks, I have received letters from readers who have balked over splitting their retirement funds with an estranged spouse who gave up their career to stay at home, raise their children and run their household - often a job that has no official start or end time. I'm curious to know what percentage of your 401(k) that $90,000 made up.

Ultimately, I leave you to decide whether this $90,000 distribution was fair because you're the one who has to live with the court's decision. Life will be easier for you if you make peace with the outcome; otherwise, every time you decide not to upgrade your flight, not take a vacation or not spend money on a shiny object, you run the risk of harking back to this moment in divorce court when your 401(k) was suddenly $90,000 lighter. Divorce is not just about legal and financial separation; the most challenging part of all is emotional separation and closure.

As Tracy Callahan - co-founder of the Divorce Coaches Academy, an organization that helps people journey through the most painful and challenging parts of the process - points out in this podcast, the hardest part of a divorce agreement is having to live with it. "I think about settlement agreements the same way I think about buying shoes," she says. "When you buy a pair of shoes, you don't buy them because they look good sitting on the shelf. You buy them because you're going to have to walk in them. The same is true with divorce agreements."

Understanding the legal basis for the $90,000 award to your ex-spouse may help. Contributions made to your 401(k) and IRA during a marriage, including returns on the principal, are often considered marital property, unless otherwise stated in a prenuptial agreement. Funds contributed before the marriage, after your legal separation or received as an inheritance are usually regarded as separate property. Equitable-distribution states divide assets equitably, but not necessarily 50/50, while community-property states aim to divide marital property 50/50.

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Limits and rules for 401(k)s

These instructions from the Internal Revenue Service sum it up: "If a plan participant gets divorced, his or her ex-spouse may become entitled to a portion of the participant's retirement-account balance. Depending on the type of plan and the amount of benefits, the ex-spouse may have immediate access to his or her portion of those assets or at some point in the future (usually upon the participant's retirement or death). Most plans require an ex-spouse to file a Qualified Domestic Relations Order with the plan administrator before the plan can pay."

After your divorce, it sounds like you boosted your 401(k) contributions based on the terms of your employer-sponsored plan. But limits apply: In 2026, workers can contribute up to $24,500 a year to a 401(k) from their own paycheck, with pretax and Roth contributions counting toward that limit. If you're 50 or older, you can make an additional $8,000 annual catch-up contribution ($32,500 in total), and workers ages 60 to 63 can get an annual $11,250 catch-up ($35,750 in total). Employee and employer contributions can reach $72,000, excluding any catch-ups.

You can usually only contribute to a 401(k) while you are still working. You can, however, rollover your money from your 401(k) to an IRA. People do this to simplify their retirement portfolio, so all their investments are in one place, and also to access a broader range of investments in an IRA. When you roll over money from your 401(k) into an IRA, you won't pay taxes on the rollover itself, but you will pay income taxes when you eventually draw down money from your IRA in retirement - so your investments continue to grow tax-deferred in the meantime.

Vanguard highlights some things to consider before a rollover. "While IRAs can have low fees, your employer-plan fees may be even lower," it says. "You should review your plan's fee structure and the IRA fee structure to determine which might be the most cost-effective. Some 401(k) plans offer institutional shares, which could have lower expense ratios than those of funds typically held in an IRA. If you leave your employer between ages 55 and 591/2, you may take penalty-free withdrawals from your 401(k). IRAs require that you wait until age 591/2."

I wish you a prosperous and resentment-free retirement as you navigate life as a single man.

Related: My father-in-law, 81, sold his $75,000 home to pay his daughter's $50,000 debt. How can I keep him from becoming destitute?

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

More columns from Quentin Fottrell:

My partner of 17 years left me his $1 million home. His children say I influenced him to do so. Should I share my inheritance?

'I don't feel sorry for myself': I'm 64 and will be renting for the rest of my life. Is that so bad?

'People in the U.S. need to wake up': As a mortgage loan officer, I rejected applications from wealthy couples. Here's why.

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-Quentin Fottrell

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