How to Approach Divorce and Retirement and Protect Your Savings

We’ll start with the bad news: Divorce frequencies for people in their 50 s have redoubled since the 1990 s. And a recent study from the Center for Retirement Research at Boston College found that divorce matches with the probability of fiscal jeopardy in retirement.

So you’re nearing retirement and you’re getting divorced and this divorce may wipe out your retirement savings? Wait, there’s good news: It doesn’t have to be that way. When you’re getting divorced, there are ways to protect your future.

Here’s what you need to know about divorce and retirement.

Hard Truth: You’re Going to Have to Share Your Savings

Retirement savings are typically part of what’s known as your equitable delivery calculation.

Translation: Unless your retirement funds weren’t accumulated during your wedlock, an ex-spouse will have the rights to them, says Dmitriy Shakhnevich, a New York-based attorney. “This is because, in theory, the idea is that if parties are married then the growth of resources by one party becomes marital owned, the same way a car or a house would.”

So when you get divorced, don’t be surprised if your ex is entitled to half of your 401( k)( considered to be joint property) that was accumulated during your wedlock — even though they are he or she didn’t work at all. The big exclusion is if you had a prenuptial agreement that discussed this.

Those are the rules — but there are ways to establish divorce and retirement coexist harmoniously.

Don’t Use Your Retirement Funds to Pay for Your Divorce

Often, divorcing marries draw fund out of retirement accounts because they simply don’t have other accessible liquid funds to handle the substantial expenses of a divorce — or because one or both parties become very litigious, says Dori Goikhman, an attorney-mediator and founder of Off the Record Mediation Work based in Silicon Valley.

“If a divorcing pair drags coin out of retirement plans improperly, they may be hit with tax sanctions, and may also be liable for income tax which would otherwise be shelved, ” Goikhman said. “They may also lose the potential for tax-free/ deferred raise, depending on the type of the plan.”

If the couple attempts to split their pension plan assets without a suitable divorce decree and court order, they may also end up subject to disadvantages. Basically, divide of retirement plans is complicated and should be handled by an experienced professional to avoid substantial fines.

Pro Tip

Getting divorced? It doesn’t have to cost a fate. Here’s how to keep the price tag down.


If you’re preparing for a divorce and making contributions to a pension account, you need to file as soon as possible, because any post-filing contributions made to the account are not divisible with your soon-to-be former spouse, says Rajeh Saadeh, a high ventures divorce and family attorney in New York and New Jersey.

In other terms, formerly you’ve filed, any coin you add to that retirement account is 100 percent yours. So preserve lending!

Continue to Save

Many people who are going through marital questions incline not to continue saving for retirement strategically, as they know these savings would be fractioned in the divorce regardles, Saadeh says.

More solely, in a divorce, retirement resources accumulated during the marriage are subdivided no matter whose name is on the retirement accounts.

Participate into a Qualified Domestic Relations Order

Retirement savings are usually in the form of tax-deferred accountings such as 401( k) s and IRAs. These details can be split between a pair, but you are able only split the portion that was lent during the marriage, aka the marital portion.

But it’s incredibly difficult to determine what the marital segment is when both the marriage and non-marital fractions have been growing in value. So don’t just split your pension plan 50/50, says Russell Knight, a divorce lawyer based in Chicago.

“The only way to truly determine the amount is to enter into a Qualified Domestic Relations Order( QDRO ), ” Knight said. “A QDRO will empower the retirement plan manager to use actuarial software to determine the marital portion to the penny on the appointment of the divorce.”

Then, the manager will create a second retirement plan for the divorced marriage, and give their portion to the new plan.

This is What Happens Without a QDRO

To split the pension or 401( k) in a divorce without taxation ramifications, the marriages need to get a QDRO. This allows the account to pay out the money to the other spouse without levy issues.

If this is not correctly completed and admitted before the divorce is final, then the money moves with a levy cause, says Beth Logan, author of “Divorce and Taxes after Tax Reform.”

“Let’s say Drew, age 46, has to pay Chris $ 150,000 from Drew’s 401( k ), ” Logan said of different situations without a QDRO in place. Now, Drew has to pay federal taxes, a federal imposition retribution of 10 percent for withdrawing the funds before turning 59 1/2, and perhaps nation charge. “That can easily be 30 percent or $45,000, ” she said.

Where will Depict get $45,000? Probably by drain the retirement, which will provoke more taxes.

A good taxation professional should look at the expected after-tax value of the retirement fund and separate the savings so the couple wages the least taxes now and in the future. This may result in one marriage coming all the Roth income while the other gets the 401( k ), for example. Or it may result in one spouse getting the entire retirement while the other gets the cash the couple compiled- which may appear dishonest, but in the end will result in more coin for each.

“It is important to know the timeline to retirement and other hopes along the way, ” Logan said.


How to save while on Social Security Disability

10/30/ 20@ 2:33 AM

Betty Redd


1/5/ 21@ 2:53 PM

Trish Young

Military pension& SS

1/5/ 21@ 2:55 PM


See more in Retirement or ask a money question

Attempt to Limit the Length of Your Divorce

Arguing over assets may end up costing more than the assets themselves, said Adam Citron, business partners at Davidoff Hutcher& Citron LLP in New York.

“Many times, defendants will ultimately withdraw its troops from and deplete savings and specifically, retirement savings, in order to continue to fund the case and pay the attorneys’ costs, ” he said.

It’s important to keep your seeings on the big picture, and estimate decisions from a business perspective, rather than an emotional one.

Danielle Braff is a contributor to The Penny Hoarder.

This was originally published on The Penny Hoarder, which assistants millions of readers worldwide deserve and save money by sharing unique job opportunities, personal storeys, freebies and more. The Inc. 5000 graded The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Read more:

Leave a Reply

Your email address will not be published. Required fields are marked *