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Retirement Assets, Divorce

How Retirement Assets Are Divided in a Divorce

For many divorcing couples, the division of assets is one of the most stressful aspects of the entire process. A lot hinges on this step—your financial well-being and future financial security largely depend on what you leave your marriage with. This is especially true when it comes to retirement assets, which will continue to grow after your divorce and until you retire.

It’s important to handle the division of retirement assets properly. Let us help you understand your options and choose a path forward. Call Holcomb & Johnson at 228-432-6652 to set up a free consultation.

 

Types of Retirement Funds

A full inventory of your retirement accounts is necessary to facilitate a fair and equitable distribution. These accounts may be valued differently and grow differently over time.

Employer-sponsored retirement plans are a common workplace benefit, with many employers offering 401(k)s that they match up to a certain amount. While pensions used to be the retirement plan of choice, fewer and fewer companies offer these as time goes on.

Individual retirement accounts, usually shortened to IRAs, offer significant tax benefits and flexibility. There are traditional and Roth IRA options.

Other options include those exclusively available to government employees, annuities, and other investments that are intended to be used for retirement.

 

Dividing Retirement Funds in a Divorce

It should come as no surprise that retirement accounts are often the most bitterly fought over in a divorce. Many assets have the potential to grow over time, but few are expected to grow until retirement. The money in these accounts is expected to sustain you through your golden years—giving up that type of security requires quite a bit of compromise and negotiation.

Mississippi, like many other states, follows the principle of equitable distribution when dividing assets. Instead of simply giving each partner half of the marital estate, Mississippi courts divvy up assets in a way that is fair to both parties. This may work out to a 50/50 division, but it may also be a very unbalanced division if one party is significantly more financially secure than the other.

You should work with an experienced divorce attorney when figuring out how to divide retirement funds. These accounts are heavily regulated at the state and federal levels. Withdrawing funds from them or transferring them without a plan can lead to serious financial penalties and tax implications. Generally, a QDRO will be drafted to ensure a smooth handover. A Qualified Domestic Relations Order specifies how retirement funds are to be allocated during a divorce. When you use this to transfer assets, you avoid incurring extra taxes or penalties.

 

What Affects the Division of Assets?

A number of factors affect how your retirement funds may be divided. These factors include:

  • The length of the marriage
  • What financial and non-financial contributions each partner made to the marriage
  • Prenuptial and postnuptial agreements
  • Whether or not alimony is being ordered
  • Each party’s individual assets
  • Each party’s health and ability to work

 

Negotiating for Your Future

If you are worried about the future of your retirement accounts, discuss your concerns with your attorney. There are options if you want to keep your accounts. If your spouse is willing to compromise, you may use the offset method to maintain control of your retirement funds. This involves giving the other party a greater share of other marital assets in exchange for your retirement accounts.

For example, they may get full ownership of the marital home, a bigger share of the marital bank account, or other assets. You may also trade non-financial assets that have value to them, such as family antiques or nostalgic items. Your attorney will guide negotiations—you don’t want to appear so invested in your retirement accounts that your spouse tries to take everything else, but you also want to make it clear that you are willing to negotiate.

 

Preparing for Divorce? Contact Holcomb & Johnson Today

Divorce is never easy—but with the right divorce attorney, you can at least feel confident about your future. Set up a consultation with the team at Holcomb & Johnson to get the process started. Just call us at 228-432-6652 or fill out our form to request a free case evaluation.

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