How a Divorce Can Impact Your 401(k) and Retirement Planning
Most people are aware that when a couple divorces, they must decide what to do with their home and divvy up the bank accounts and other assets accumulated throughout the marriage. But did you know that your 401(k), pensions, and other retirement accounts are considered assets that may also be subject to division? Below we have identified some common questions about what happens to these accounts during a divorce.
How are 401(k) and IRA Accounts Split During a Divorce?
Retirement accounts that include money that was earned during the marriage are considered marital property, and can either be divvied up or awarded all to one spouse during property division. Note that only marital property is subject to division, which means that if a spouse paid into an account before their marriage, then that amount is considered their own separate property.
What Happens to a Pension Plan During a Divorce?
If the money in a retirement account is marital property, the participant spouse has the option to either give their ex-spouse a share of the benefits or buy out the non-participant spouse. The pension will have to be valued in order to determine whether one spouse will keep the entire pension while the other spouse receives property in equal value, or if the spouses will split its value as ordered by the court. Many people opt for the latter option in order to avoid an actuarial valuation of their pension, which can be a complicated process.
What Happens if You Started Saving for Retirement Before Marriage?
The entire value of a pension may not be considered marital property. If a spouse started saving for retirement before the marriage, then he or she will have a claim on whatever portion they saved before the date of their marriage, and the rest will be subject to division.
How Does Divorce Affect Social Security Benefits?
If your marriage lasted 10 years or more, then you can receive benefits on your ex-spouse’s work record if the benefits you would receive based on your own work record are less. You may collect benefits as long as you remain unmarried, even if your ex-spouse has remarried. Your benefit as a divorced spouse is equal to 50% of your ex-spouse’s full retirement amount if you start receiving benefits at your full retirement age (age 62 or older). If you continue to work while receiving these benefits, there are limits to how much you can earn.Property division can be complex, especially when it comes to dividing retirement accounts. It is important to work with an attorney you trust to ensure that all aspects of your divorce run smoothly and that you receive all the assets that you are due. If you are facing a divorce, we invite you to get in touch with McKinley Irvin to schedule an initial consultation with a Washington divorce lawyer. We serve clients from office locations in Seattle, Tacoma, Bellevue, Everett, Vancouver, and Puyallup.