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Older couples should consider retirement accounts during divorce

On Behalf of The Law Offices of Ronda A. Middleton

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Sep 14, 2016
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When California couples get divorced, they often worry about how they will split up their assets. For younger couples, the house may be the most valuable asset. However, older couples are more likely to worry about their retirement accounts.

In a divorce, retirement accounts are generally divided equally between the spouses. This can often cause problems with lasting effects because the funds that were intended to support one household are now divided between two. Many times, one spouse contributes more to the retirement savings than the other. While this person may feel entitled to take more of the savings, courts usually do not apply this rationale. The law sees marriage as an economic partnership between both spouses.

When going through the process of divorce, it is important to carefully consider the various factors that affect different types of retirement accounts. For example, it is important to look at any after-tax impacts. IRA, 401(k) and pension accounts are usually taxed when there is a withdrawal. In contrast, Roth IRA and Roth 401(k) accounts are taxed at the time of contribution. Therefore, spouses may choose to divide these accounts based on their after-tax value.

Spouses may also consider their new individual income tax brackets. If one spouse will net a lower amount due to a higher tax liability, the spouses may decide to alter the percentage so that each individual gets the same after-tax amount.

Spouses who are going through the process of divorce may wish to contact a family law attorney. A legal professional may be able to explain how to divide assets such as retirement accounts.

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