As you navigate through the physical, mental and emotional upheaval of a divorce, you might overlook one aspect of your life that needs close attention: your retirement. Once you have addressed your immediate needs, consider the following short- and long-term steps to ensure that your retirement plan remains intact.
Assess all retirement documents. Organize all records of retirement funds, looking through tax returns for information about dividends from IRAs or bank accounts. Remember to review work retirement benefits from both your current and previous employers. Adjust your rate of saving toward retirement accordingly.
Equitable, not Equal Division
Since California courts consider retirement assets as marital property, the assets will be divided equitably. However, this doesn’t mean that they will be evenly split. If you have been in a long marriage, and you are close to retiring, the court will likely favor a 50-50 ratio. However, if you are younger with small children, and you have not been married long, the courts might take a different approach. The attorneys for both parties can use a qualified domestic relations order to determine how to split benefits. While you might be tempted to split retirement assets equally to avoid the hassle of calculating the exact division of the monies, discuss your options with a financial advisor first to determine if that will be to your best advantage.
Dividing 401(k)s and IRAs
Couples do not follow any hard-and-fast rules when it comes to dividing these monies. One spouse might claim it all, or you might split it. Financial experts generally advise dividing retirement by percentages instead of by exact numbers, because if the market plummets or skyrockets, you will share the losses or gains. You can separate retirement monies that you or your spouse accrued before marriage. Doing so, however, will likely take the help of a knowledgeable professional.
A Word of Caution
Don’t use your retirement money to pay for your divorce. While you might be tempted to withdraw the cash, obtain a loan instead. You will not only have to pay an early withdrawal fee if you are younger than 59 ½, but you will also lose out on compounding interest on any tax-deferred monies.
The attorneys at the Law Offices of Silky Sahnan can explain what to do to attend to longer-term projects, like revamping your retirement, while tackling the more urgent needs of your California divorce. Call us now at 888-228-1098 for a confidential consultation.