Saving for retirement is often an effort that spans a person’s entire career, and a person’s retirement savings can be particularly. This is especially true as they reach the later years of their career. Unfortunately, the value of these accounts can also lead to conflict during divorce. Understanding how retirement assets are divided in a divorce is crucial to ensure a fair settlement for both parties.
How are retirement accounts handled during the divorce process?
When a couple decides to part ways, retirement assets, just like other marital property, are subject to division. These assets can include 401(k)s, IRAs, pensions, and other retirement savings plans accumulated during the marriage. Generally, any funds saved between the date of marriage and the date of separation are deemed marital property.
The division of these assets is not always a straight split down the middle. Florida courts divide a couple’s marital property using what is known as “equitable distribution.” This means the court will divide assets fairly but not necessarily equally. The court may consider factors such as the length of the marriage and each spouse’s financial circumstances when dividing assets.
Can I protect my retirement savings during property division?
While divorce may impact your retirement fund, it is possible to safeguard your future financial health even at the end of your marriage.
The value of a retirement account is different from what you see in the account balance right now. It is vital to think about how its value will grow over time. Guidance from a financial professional and an experienced attorney can help you appropriately value your account and ensure that you receive your fair share of your savings.
It is also important to remember that withdrawals from retirement accounts are typically taxable, and early withdrawals may be subject to penalties. One of the critical tools used in dividing retirement assets is a Qualified Domestic Relations Order (QDRO). A QDRO is a legal document allowing for the division of a retirement or pension plan without triggering taxes or early withdrawal penalties.
While dividing retirement accounts is a complex issue, people at any stage of life can protect this investment in the future.