Can a Spouse Take Half Your Retirement Savings in a Divorce?

Can a Spouse Take Half Your Retirement Savings in a Divorce?

Getting divorced can be really stressful, and trying to figure out how to split up your assets – especially retirement savings accounts like 401(k)s and IRAs – can make it even harder. Even though you worked hard to save that money, in most states, retirement accounts are considered marital property, which means they can be divided between spouses in a divorce settlement. Here’s what you need to know about protecting your retirement savings if you’re going through a divorce:

The Rules Depend on Where You Live

Most states follow either equitable distribution or community property laws when it comes to splitting up assets like retirement accounts in a divorce. In equitable distribution states, assets are divided in a way the court considers fair, but not necessarily 50/50. In community property states, the default is an even 50/50 split of all marital assets.

Your Spouse is Entitled to a Portion of the Growth During Marriage

In most cases, your spouse is entitled to around half of whatever growth in your retirement accounts occurred during the marriage. So if you had $50,000 in your 401(k) when you got married, and now it’s grown to $150,000, your spouse would get around half of that $100,000 growth – not half of the total balance.

You’ll Need a Qualified Domestic Relations Order (QDRO)

For 401(k) plans and other employer accounts, you can’t just take money out or transfer ownership without penalty – you need a Qualified Domestic Relations Order (QDRO). This is a special court order that tells the plan administrator how to divide the account. Make sure you have one drafted by your divorce attorney.

Consider Tax Implications

It’s usually best for the receiving spouse to leave the money in the original account until retirement if possible, to avoid taxes and penalties. If they need to cash out early, understand the impacts. You may want to offset the account balance with other assets.

Get Professional Help

Dividing up retirement accounts can get complicated, especially when pensions are involved. Consider working with a Certified Divorce Financial Analyst who understands all the intricacies. Their guidance can save you money and headaches down the road.

Going through a divorce is tough enough without having to stress about your financial future too. Take the time to understand your options when it comes to splitting retirement savings, and get professional support if you need it. With the right preparation, you can get your fair share while still having enough left to retire comfortably.

Sources:

• How to Protect Your Pension in Divorce: 4 Ways – Investopedia
• How to Split IRAs and Other Retirement Plans During a Divorce – Investopedia
• How to Protect Your 401k in a Divorce – FindLaw
• How to Protect Your Retirement Savings in a Divorce – SmartAsset
• How to Split Retirement Accounts in Divorce | Nolo
• Can you lose your retirement savings in a divorce? One man’s story | Principal