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Retirement accounts must be addressed during the divorce

On Behalf of | Jul 5, 2022 | Divorce, High-asset Divorce |

Divorce has emotional components and economic ones. The emotional issues will heal over time, but economic missteps can haunt you for years and impact your lifestyle, retirement and financial security. While there may be a long list of individual assets or separate property, shared assets or community property, weighing options on how to best divide 401(k) plans, IRAs, pensions, and other retirement plans is essential.

In situations where the retirement assets accrued through a work plan during  the marriage, you may not know how much the account is worth or even realize that any such funds exist. Whatever the circumstances, you are entitled to a portion of the retirement accounts even when they are tied to your spouse’s job.

Getting up to speed

A Qualified Domestic Relations Order (QDRO) is a special court order that authorizes spouses to receive their fair share. Men still typically accrue more retirement assets as the primary breadwinner, so this issue is critical for women to note, especially if they are not deeply involved in managing the family’s finances. Here are some ways you can address the knowledge gap:

  1. Learn why these accounts are so crucial to long-term financial security;
  2. Learn the importance of a QDRO; and
  3. Become more aware of household finances and the value of assets.

Knowledge is power, and these steps can help ensure the division of retirement assets is not something you later regret.

This is business, not personal

Some may feel uncomfortable talking about finances with their spouse, particularly when the other spouse “handled” it. Nevertheless, effectively communicating your needs and concerns can help the divorce go more smoothly. Researchers suggest the following tips as effective:

  1. Keep the tone of the conversation informational but factual rather than emotional;
  2. Stick to basic concepts;
  3. Outline steps for addressing the matter;
  4. Use specific examples;
  5. Remind the spouse that a fair split of community assets like retirement plans is legal and proper;
  6. Encourage the use of a QDRO but be open to other arrangements; and
  7. Stress the need to address the division retirement accounts before finalizing the divorce.

Additional guidance may be necessary

It is generally recommended to consult with a family law attorney when planning a divorce. Still, it is especially crucial for older couples, for whom  the retirement account can be a substantial portion of their community assets. In cases like these, an experienced, Board-Certified Texas Family Law expert attorney can help clients get the financial security they deserve.