Getting divorced at any age can be tough from both an emotional and a financial perspective. Finding a way to end the life that you’ve spend years, perhaps even decades, building with your spouse can be soul-crushing, and determining the best way to stabilize your finances post-divorce can be a challenge. All this uncertainty and its accompanying stressors can be amplified when you’re getting divorced later in life. Issues like property division and spousal support become even more important in these circumstances. And if you’re like most people who are getting divorced later in life, then you might be particularly concerned about your retirement accounts.
This is understandable given that you have limited time to replenish your retirement wealth. That’s why as you navigate your divorce, you need to be careful about how you address this issue.
How can you shield your retirement accounts during divorce?
Given our state’s law on the division of marital assets, it might be hard to keep all of your retirement assets to yourself. However, here are some tips that might help you retain as much of your retirement wealth as possible:
- Use other assets as bargaining chips: There’s probably a lot that your spouse wants to get out of your divorce. While at first glance this might be frustrating to deal with, it actually gives you a lot of room for negotiation. For example, if your spouse is pushing for a large share of your retirement assets but they also want the family home, you might be able to use the family residence as a bargaining tool to keep your spouse’s hands off your retirement. So, think creatively here to see if there are negotiation strategies that you can use to your favor.
- Identify individually held retirement accounts: If you have retirement accounts that were established before your marriage and have remained separate from the marital estate throughout your marriage, then you can likely argue that those accounts are separate property that should therefore be exempt from the property division process.
- Utilize a postnuptial agreement: If you’re not quite at the point of getting a divorce but the thought has crossed your mind, then you might want to see if you can get your spouse to agree to a postnuptial agreement that specifies how your assets will be divided in the event of divorce. Here, you and your spouse can figure out how issues like the division of retirement accounts will be handled if your marriage sours and ends up heading toward dissolution.
- Understand the process: If it looks like you’ll have to divide your retirement assets in some fashion, then you’ll need to understand how to properly divide them, otherwise you could be hit with massive taxes and penalties. For example, if you’re dividing something like a 401(k), then you’ll need a Qualified Domestic Relations Order to avoid unwanted financial consequences for early withdrawal.
Protecting your finances as much as possible during your divorce
Your financial future is on the line when your marriage heads toward divorce. While there’s a lot to think about throughout the process, there are also a lot of steps you can take to protect your interests throughout. You simply have to educate yourself and be as proactive as possible. We know that can be hard to get a handle on when you’re dealing with the emotional aspects of your marriage dissolution, but this isn’t a process that you have to face on your own. So, if you’re ready to learn more about your next steps, then please continue to read our blog and browse the rest of our website.
