In a divorce, you must divide many of your assets between your former spouses. This includes the house, your savings accounts, and any investments–but does it include your retirement? Many people preparing for divorce find themselves asking this key question–and scrambling to protect their retirement in the event of a divorce.
Is Retirement an Considered a Financial Asset During the Divorce?
You and your spouse may have many shared financial assets: vehicles, investment accounts, a house, perhaps even a business. Your retirement savings, like other savings accounts created throughout your marriage, counts as a financial asset. What this means is that your former spouse can claim a percentage of your retirement during the divorce. In some cases, that may mean an equal split; in others, you may find a way to reduce the amount your spouse can claim.
Why Can Your Wife Take Part of Your Retirement?
You worked hard for the money in your retirement account–and if it’s set up like a traditional retirement account, you’re probably the only one who has contributed to it. Unfortunately, that doesn’t mean that your retirement account is a protected asset during your divorce. Your retirement account, like other accounts, is seen as a marital asset. There are several key reasons why your wife may secure part of your retirement account in the divorce.
The two of you probably planned together to use that account to fund your joint retirement. When you created financial plans for your future, it included your retirement account. Your spouse, legally speaking, should not have to miss out on that financial security, including the return from your investments.
Your spouse may have missed out on opportunities to create her own retirement account. When one spouse stays at home instead of working throughout the duration the marriage, caring for the home and family instead of going to work, she does not have the chance to build her own retirement account.
Your spouse still contributed to your home, family, and future. Even if your spouse did not work, she still contributed to your family: taking care of the kids, taking care of the home, and supporting you in your endeavors. She, too, made sacrifices for the family as a whole. That entitles her to a reasonable share of those retirement accounts to help secure her financial future.
How Can You Protect Your Retirement Account?
While your retirement account is considered a marital asset, you don’t necessarily have to hand a portion of it over to your spouse automatically. Consider some of these methods for protecting your retirement.
Split retirement accounts. If your spouse worked and contributed to her own retirement account, you can choose to keep your own retirement accounts. An equitable division of finances and assets may not necessarily be completely equal–and this simple method can help keep your retirement funds in your hands.
Be willing to give a little somewhere else. You need not split every asset down the middle. Instead, consider what you might be willing to give up now–the house; a vehicle; the contents of another account–in order to prepare for your financial future.
Consider when your retirement account accumulated. If you contributed to the retirement account prior to your divorce, those funds are not considered marital assets and therefore need not be divided during the divorce.
Divorce can be hard on everyone involved in a variety of ways. Make sure you have a lawyer on your side who will help guide you through the process and protect valuable assets. Need a lawyer? Contact us today to learn how we can help.