Present value of 401K

[InDenial]

STBX has about $100,000 more in his 401K than I do in mine. He has proposed that he give me $50,000 in other (non-retirement) assets and leave our 401Ks intact.

I said, "Wait a minute, I need to think about this. Does $50,000 in a 401K really have the same value as $50,000 in other assets?"

Is a dollar in a 401K worth more than a dollar in regular assets, on the grounds that 401K earnings are sheltered from taxes until retirement?

Or is it worth less on the grounds that the the person who takes it out at retirement has to pay taxes on it?

I'm quite confused!! 

I suggested a QDRO but he says that's too complicated.

[Lee Borden]

It depends on what you plan to do with the money. If you plan to save it and invest it for your retirement, you would rather have money in a 401(k) where it can grow (you hope) tax deferred. On the other hand, if you need the cash now (for example, for the down payment on a house), you would rather have assets that are more easily convertible to cash, or at least assets that will produce income.

As for whether it's too complicated, a QDRO will cost several hundred dollars, but I think that's a small price to pay for $50,000 +/- of wealth, especially if you're planning to save it long term.

[InDenial]

Lee, thanks for your reply. At our subsequent mediation session I said I wanted a QDRO, giving your reasoning. The mediator said it might cost around $250 to prepare one. STBX agreed to it.

[Lee Borden]

$250 would be on the low side. Costs typically range in my neck of the woods $500-1500.

[InDenial]

I'm hoping it will be quick and easy, because my STBX's plan administrator sent an example form and said that if we use it, they don't even need to review a draft. Luckily he works for a very large company so I assume they get these all the time. His lawyer is going to do it and charge for his time.

But thanks for the warning.