7 Ways to Protect Your Retirement During Divorce

Divorce can be a logistically and emotionally overwhelming experience, leaving you with many questions about the future. One of those questions is likely to be: What will happen to my retirement savings? If you’ve been in the workforce for decades, have saved a healthy amount in a 401(k) or an IRA, or have a pension, you may wonder if an ex-spouse is entitled to those assets. You may also be concerned that an ex-husband or ex-wife may come back to try to claim part of a 401(k), IRA or pension years after you thought the matter was settled.

The fact is that your retirement assets saved during the marriage may well be considered “marital property,” and potentially subject to equal distribution between both spouses. But the situation may vary considerably depending on what state you live in (either a “community property” or “equitable distribution” state) and other factors. An experienced attorney can help ensure your share of retirement assets is protected, but here are some general facts and guidelines.

  1. Gather financial documents: Before you can begin dividing your assets, you should clearly understand what you own. This includes any retirement accounts, such as 401(k)s, IRAs, employee stock plans, or pension plans. Make copies of all relevant financial documents and keep them in a safe place.
  2. Consult with a financial advisor: A financial advisor can help you understand the value of your retirement assets and how they may be affected by the divorce. They can also help you develop a plan for preserving as much of your retirement savings as possible.
  3. Understand what is “marital property:” Retirement benefits earned during a marriage are normally considered “marital property” to calculate what each ex-spouse is entitled to. In “community property” states, all marital assets are divided equally. In “equitable distribution” states, marital assets are divided “fairly” but not necessarily equally. Courts may look at each former spouse’s respective savings and earning power to decide what is fair.
  4. Consider a qualified domestic relations order (QDRO): A QDRO is a court order that allows you to divide your retirement assets without incurring any tax penalties. It is important to have a QDRO in place if you want to transfer ownership of any retirement assets to your spouse as part of the divorce settlement.
  5. Don't withdraw funds from your retirement accounts: It can be tempting to withdraw funds from your retirement accounts to pay for legal fees or other expenses related to the divorce. However, doing so can have significant long-term consequences, such as incurring tax penalties and reducing the amount of money you have available for retirement.
  6. Don’t try to hide assets: Trying to hide retirement assets from an ex-spouse could very well backfire. If you are not honest in your financial disclosures, and your concealment is discovered, a judge will likely penalize you by giving your ex a larger portion of the assets.
  7. Update your beneficiary designations: If you have any retirement accounts that name your spouse as the beneficiary, you will need to update these designations after the divorce. Failing to do so could result in your ex-spouse receiving the funds rather than the person you intended.


Karen Rosenthal

Karen B. Rosenthal is a partner and co-founder at matrimonial litigation firm Bikel Rosenthal & Schanfield LLP, where she brings 35 years of matrimonial law experience to bear in matters involving high-net-worth equitable distribution, contentious custody battles, and other high-stakes disputes. Certified as an Attorney for the Child and a frequent speaker on topics related to children going through high-conflict divorce, she has been recognized as a leading New York lawyer by Super Lawyers, Best Lawyers, Crain's New York Business magazine, and New York magazine.

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