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2 common solutions for shared retirement accounts in divorce

Retirement is a time when people slow down and appreciate their lives and families. Most adults will spend their entire working lives putting aside money so that they can retire comfortably. The more you and your ex have contributed toward retirement savings during your marriage, the bigger the assets to divide in your upcoming divorce.

Retirement savings are often a major concern, with both spouses wanting to protect their future financial stability as much as possible. How do most couples approach retirement accounts during a divorce?

Using a QDRO to divide the account(s)

Some couples may share just one retirement savings account between them, possibly attached to one person’s employment. They could also have separate accounts that they want to split. Usually, if you want to make a withdrawal from a retirement account before you reach retirement age, you will have to worry about taxes and penalties.

However, you can create a qualified domestic relations order (QDRO) as part of your divorce. When approved by the courts and properly filed, a QDRO will protect you from financial penalties when you divide a retirement account as part of your property settlement.

Using the value of the accounts to guide property division

It is not uncommon for couples to have multiple retirement accounts. Each spouse might have an account through their employer, and they may also contribute to other joint accounts or investment funds intended as retirement savings.

Couples who have multiple accounts may want to determine the current value of each and then divide them in a manner that is fair based on those values. The person whose name is on the account may be less important than the overall value of the account(s) retained by either spouse.

Couples may find that they need to use assets other than retirement accounts to make the outcome truly fair and appropriate. There are other solutions too, including requesting spousal support when someone starts drawing on their pension or requesting other assets in lieu of a share of the retirement account.

Couples in high-asset marriages thinking about divorce will want to learn more about property division before making major decisions.

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