Whether you have stayed married for three decades or three years, the end of your marriage will have practical and financial implications for both you and your spouse. Especially if you are in your late 40s, your 50s or your 60s, you may worry that your divorce will affect your retirement plans.
After all, you and your spouse will have to split your assets. There could be child support requirements or even alimony after your divorce. Will you have to share your retirement savings, and will that delay your scheduled retirement?
Retirement accounts are often subject to division
You and your spouse may have already negotiated terms for property division. If you have a prenuptial or postnuptial agreement, reviewing that can help you determine if your retirement savings are at risk. Those without marital agreements can potentially negotiate with their spouse in mediation or through attorneys to preserve their retirement savings. You may be able to reach a settlement that lets you retain your retirement savings.
The good news is that even if you do have to divide your retirement account or you litigate and a judge orders you to divide the account, a Qualified Domestic Relations Order (QDRO) will protect you from early withdrawal fees and other penalties related to the division of your retirement savings. While you may have to share some of the account balance with your spouse, at the very least, you won’t have to lose more of the account to penalties and taxes.
Once you go to court, there are no guarantees
Those who have a marital agreement with their spouse and those who arrange an uncontested divorce have the benefit of staying in control regarding the outcome of their divorce proceedings.
If you litigate your divorce proceedings, a judge will interpret California community property division laws and apply them to your property. You won’t have any control over what they ultimately decide, although you can make suggestions and provide evidence that supports your desire for a specific solution.
Some people adjusting to the lower balance in their retirement accounts may need to plan to work for a few extra years. Others may want to reevaluate and change some of their retirement plans so that they can live their golden years the way they always intended despite the end of their marriage. If you don’t have to split your account, you may need to make fewer retirement compromises.
Learning more about property division will help you feel prepared for your financial circumstances following a complex divorce.