Saving for retirement is fairly common for couples in Texas. Many employers offer 401(k) accounts and some even match or contribute funds. It can be such an easy process to have money automatically deducted for retirement savings that most people do not give those funds much thought until a drastic life event — such as divorce — comes along.
Dealing with retirement savings during divorce can be a touchy subject. A spouse who was the sole earner and feels that he or she is entitled to the entirety of the funds is not an uncommon occurrence, but family law views things differently. Any money saved for retirement after a couple is married is considered community property, as it was saved with the intent of supporting both individuals in their later years.
However, even though retirement funds are community property, dividing the property is not as simple as hacking the savings in half. Taxation on early withdrawals can impact what one spouse might feel is a fair distribution, or there might be multiple accounts — such as Roth IRAs, CDs and even real estate — that need to be located and accurately tallied. This can be a time-consuming task, but is essential to ensuring that each party receives a share that is considered right and just.
It can be overwhelming to face complicated tax laws that apply differently to various accounts and savings plans. Even when one party knows that he or she is entitled to a share of the retirement assets, it can be tempting to forgo a just claim in order to hurry along a divorce. Couples in Texas have the option of using a third-party mediator that, along with the guidance of their respective attorneys, can help reach an acceptable resolution for everyone involved.
Source: The Motley Fool, “How to Protect Your Retirement Savings During Divorce“, Sarah Szczypinski, Sept. 2, 2017