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How can you protect your retirement assets in a divorce?

On Behalf of | Aug 23, 2023 | Blog, Divorce

Retirement accounts often represent a substantial portion of a couple’s joint assets. Therefore, how a couple splits these funds during a divorce can have long-term implications on each party’s financial health and stability.

Withdrawing money from retirement accounts like a 401(k) or an IRA for any reason before a specified age typically triggers significant penalties and taxes. However, there are a few key strategies you can use to help protect your retirement assets in a divorce.

Document your assets

Gather records and statements that provide a comprehensive overview of your retirement accounts. These documents will serve as evidence during negotiations and help ensure a fair division of assets.

Consider a qualified domestic relations order

A qualified domestic relations order is a legal document that outlines the division of retirement plan benefits between spouses. This order allows for the separation of retirement assets without incurring early withdrawal penalties or tax consequences. By establishing a QDRO, you can ensure that the court divides your retirement assets as intended.

Negotiate trading assets

In some cases, trading other marital assets for a larger share of retirement assets can be a practical strategy. By carefully evaluating the value of different assets, you can work toward an arrangement that secures your retirement.

The U.S. Census Bureau reports that 34.6% of adults age 64 or younger have a 401(k)-style retirement account. If you have this or any other type of retirement savings, then it is important to understand how divorce will affect it. You have options for keeping your retirement plans on track.