If you are getting a divorce and were planning for retirement by supporting your spouse’s retirement contributions, now is a good time to think about how your divorce could impact your finances in the future. Having to divorce now could mean losing all of those assets unless you fight for them and establish that you want a portion of your shared assets.
The fact that your spouse’s retirement income and savings is in their name does not mean that you aren’t entitled to at least some of it, in most cases. In many cases, you’ll find that the savings set aside during your marriage is actually shared property and that you’re entitled to a portion of it.
What happens to retirement savings when a couple divorces?
When a couple divorces, retirement accounts may be split up through Qualified Domestic Relations Orders or by the divorce decree. The method used depends on the specific kind of accounts that you’re dealing with.
Take, for example, a 401(k) plan. If your spouse has an employer-sponsored plan, you may be entitled to a portion of the balance as long as you don’t have a prenuptial or postnuptial agreement that says otherwise. In this case, you’d want to get a Qualified Domestic Relations Order to protect your interests. The QDRO will instruct the pension plan on how to pay out the benefits to each person, so that there is no confusion in the future.
Consider if you don’t have a 401(k) or pension plan but instead just a savings that has been set aside. In that case, you can negotiate for a fair share and have the distribution listed in your divorce settlement. Then, in most cases, your spouse would give you your share or vice-versa, so that it can be placed into your own private account.
It’s important that you know about your retirement accounts and your spouse’s, so you can negotiate for a fair divorce settlement. Doing this will help you protect your own best interests and the future financial outlook that you were aiming for. Your attorney will help you negotiate, so you get the best arrangement possible.