After years of stashing away part of your earnings into 401(k), envisioning a cozy nest egg for your golden years, life can throw you a curveball.
Whether you want to pay a debt, pay medical expenses, or buy a new car, you may find yourself considering tapping into your 401(k) without your spouse’s signature. But, it is possible to withdraw from 401(k) without spousal consent?
In this article, we delve into what is spousal consent, when it is required in 401(k), and situations when you can tap into your 401(k) savings without spousal consent.
What is spousal consent in 401(k)?
Spousal consent is a requirement to obtain your spouse’s approval when making certain financial decisions regarding the shared assets in 401(k).
Generally, a 401(k) is considered a marital asset, and it is intended to provide a financial cushion for individuals during their retirement years.
Due to the potential impact on the financial future of both spouses, spousal consent acts as a safeguard to ensure financial decisions involving the 401(k) are made with the agreement of both spouses.
These financial decisions may include taking a 401(k) loan, making distributions from the 401(k), choosing distribution options, or even changing the beneficiaries.
Can Your Spouse Empty a 401(k) Without Your Consent?
In most cases, a spouse cannot empty a 401(k) account without their spouse’s signature. 401(k)s are considered marital assets, and the rules surrounding 401(k) accounts are designed to ensure major financial decisions are made with both spouse’s involvement.
However, spousal consent is not mandatory across all 401(k) plans, and participants may be allowed to withdraw their party without getting spousal consent. Therefore, if your 401(k) plan does not require spousal consent for distributions, you may be able to take an in-service distribution or 401(k) loan without your spouse’s signature.
If your 401(k) plan requires spousal consent, you will receive a spousal consent form alongside the withdrawal documentation. You will be required to submit a signed spousal consent form alongside the withdrawal documents for the withdrawal to be approved.
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When spousal consent is not required for 401(k) distributions
Spousal consent is not always required for 401(k) distributions, especially in situations involving legal procedures or financial arrangements.
One of the situations when spousal consent may not be required is when a qualified domestic relations order (QDRO) is issued. A court may issue a DQRO during divorce proceedings to divide retirement assets, including 401(k), between spouses.
The order specifies how the assets are shared between the parties involved. A QDRO allows a participant to make distributions or transfers from their 401(k) account to their ex-spouse without requiring the ex-spouse’s signature.
Additionally, spousal consent may not be required when a participant selects certain distribution options that don’t involve survivor benefits. For example, if a participant requests a lump sum distribution from their 401(k) account, the absence of survivor benefits means that the spouse’s benefits are not affected. Also, if a participant chooses to receive a single-life annuity that does not provide ongoing benefits to the surviving spouse, spousal consent may not be required.
Do I need spousal consent to add another person as a beneficiary in 401(k)?
If you are married, and you wish to designate someone else other than your spouse as the primary beneficiary of your 401(k), you will be required to obtain spousal consent to make the change. If your spouse agrees to your change of designation and has signed the spousal consent form, you can proceed with the designation.
However, if you are adding another person as a beneficiary in your 401(k) plan, you do not need spousal consent. Adding a beneficiary means you are specifying who will inherit your retirement assets when you die, and it does not impact the distribution of funds while you are alive.
If you are in a civil union or registered domestic partnership that does not meet the legal definition of marriage, whether or not you require spousal consent depends on the state laws and terms of the 401(k) plan.
Do IRAs have the same spousal consent requirements as 401(k)?
IRAs are not subject to the same spousal consent requirements as 401(k) plans.
Generally, spousal consent requirements apply to employer-sponsored retirement plans like 401(k) and 403(b) plans, and they are mandated by federal laws such as the Employee Retirement Income Security Act (ERISA). IRAs are governed by a different set of rules from 401(k)s, and their requirements can vary.
An IRA owner has more autonomy over their retirement money, and they can make major financial decisions regarding contributions, changing investment options, withdrawals, and beneficiary designation without requiring spousal consent.
However, different rules may apply if you live in a community state. If you want to name someone else other than your spouse as the primary beneficiary, you will be required to obtain spousal consent before the change can be effected.
Related: Is 401k a waste of money?
Is spousal consent required for 401k rollover to IRA?
Spousal consent is not required when rolling over a 401(k) to an IRA. A 401(k) rollover involves moving funds from a 401(k) into an IRA, usually after you leave or quit your job. An IRA offers several benefits over a 401(k), including a wide range of investment options, better control over the funds, and lower fees.
Generally, a 401(k) rollover is considered an individual decision, and it is not subject to spousal consent unless the participant chooses a distribution option that could affect spousal rights. Also, changing the IRA beneficiary designation will not require spousal consent, since IRAs are not offered by employers and hence not subject to ERISA requirements.
ERISA spousal consent requirements
The ERISA act is a federal law that provides certain requirements regarding spousal consent for certain types of distributions. The law applies to employer-sponsored retirement plans like 401(k) and pension plans.
Generally, ERISA requires retirement plans to offer a Qualified Joint and Survivor Annuity (QJSA) as the default form of payment for married participants, unless either party waives this requirement. This form of payment provides a lifetime annuity for the participant, and upon their death, an annuity for the surviving spouse.
If a participant wants to receive benefits using a payout option that does not provide a survivor benefit for the spouse, they must get spousal consent. For example, a participant must get spousal consent if they want to receive payments using a lump sum distribution, single-life annuity, or other option that does not provide a survivor benefit.
In situations where spousal consent is required, a participant must obtain written consent to waive the QSJA requirement. The consent form must be submitted to the plan administrator alongside the withdrawal forms or other plan documents.