Increasingly, divorce is affecting older age brackets. In fact, in 2009, approximately 25 percent of all divorces involved people over age 50.
Divorcing in late-middle age involves a whole host of concerns that young people typically do not face. Chief among them is the issue of how to handle retirement savings, especially when the divorcees are at or approaching retirement age.
If you’re seeking an Arkansas divorce, there are a few things you need to know about how to handle pensions, 401(k)s and other retirement savings accounts.
Retirement Savings are Marital Property
Most retirement accounts are considered to be marital property – that is, property that belongs equally to the husband and the wife – even if only one person contributed to the account. Generally, there is an exception from this rule for contributions made before the marriage began. However, the income generated on this principal often does count as marital property.
As a result, retirement accounts will need to be split during the property division phase of a divorce.
There Are Different Rules for Different Accounts
Federal law governs the division of 401(k), 403(b) and similar accounts, while IRAs are controlled by state law. Pensions funded by the military and federal, state and local governments all follow their own set of rules for division as well.
Don’t expect that there will be a “one size fits all” solution to your retirement questions.
You’re Going to Need a Plan
Your retirement is going to look a lot different now that you are getting divorced. This is especially true if only one spouse worked (and saved for retirement) while the other stayed home. It’s a good idea to meet with a financial planner as soon as possible to figure out how to best fund your retirement.
Source: Forbes, “How Divorcing Women Should Handle Retirement Accounts and Pension Plans,” Jeff Landers, June 13, 2012.