Retirement Accounts
Are Retirement Accounts A Divisible Asset?
401(k)s and IRAs (TRADITIONAL and ROTH)
The feelings about dividing retirement funds like 401(k)s and IRAs can be complicated, but given that the accounts have specific dollar amounts, the math is relatively simple. The totals include any employer-matched funds.
Here's an example of the math for a 401(k) worth $500,000.
- Year account is established: 2005
- Year of Marriage: 2010
- Year of Divorce: 2022
- Total Value Now: $500,000
- Value earned between 2010-2022: $300,000
The amount earned during the 12 years of marriage is a divisible asset; anything earned prior to or after the marriage is separate property.
In this case, the non-contributor would receive 1/2 of $300,000, or $150,000.
Dividing Pensions
When it comes to a pension, it gets a little murky because the value is unknown, especially if the person earning it is still working.
Here's an example of what the math looks like for a 30-year pension, depending on length of marriage.
SCENARIO 1:
- You were already earning a pension 10 years before the marriage.
- Your marriage lasts for 10 years.
- Another 10 years go by before you collect on your pension.
- Only the 10-year overlap of when you were married is divisible; the first 10 and last 10 are considered separate property.
If you're married for 10 of the 30 years during which the pension was earned, only those 10 years of retirement are a divisible asset.
Meaning, 1/6 goes to the non-earner, and 5/6 goes to the earner.
SCENARIO 2:
- You start earning a pension while you are married.
- Your marriage lasts 15 years.
- You work an additional 15 years before retiring.
If you're married for 15 of the 30 years during which the pension was earned, only those 15 years of retirement are a divisible asset.
Meaning 1/4 total to the non-earner, 3/4 total to the earner.
Items of Note:
- Retirement accounts or benefits that are not considered divisible assets can still be counted as income when calculating spousal or child support obligations, thereby impacting the overall financial division.
- Funds designated as separate property can be garnished if support payments are in arrears.
- Some accounts or benefits cannot be received simultaneously.
In conclusion, depending on how many accounts you have, their type, tax implications, and financial division, it can turn into a hornet's nest in short order. Understanding the intricacies of retirement accounts and benefits is essential in a divorce.
Related Reading:Â What Is In A Divorce Decree?
Related Reading:Â Steps to Divorce In California
How Is Social Security Handled?
Many factors come into play when determining Social Security benefits. For marriages of more than ten years, it’s essential to know how divorce impacts Social Security.
Social Security Basics
Your ex may be eligible to receive benefits based on your work history and vice versa.
In order to procure Social Security benefits, you or your ex must be eligible to receive retirement or disability, to begin with. Neither spouse has to file for Social Security yet, as long as they are eligible. If your divorce was more than two years prior, you can still make this claim. When you choose to collect also has an impact.
Social Security And The Death Of A Spouse
Upon the death of a former spouse, you may still be eligible to collect Social Security benefits based on your spouse’s employment history, even if you’re divorced.
If you meet the criteria of a surviving divorced spouse, you stand to receive Social Security benefits.
There are, of course, certain conditions. Again, the marriage must have lasted at least 10 years. You also must be older than 60, or 50 if you have a disability. Remarriage also impacts whether or not you can collect Social Security benefits as a surviving spouse.
Social Security And Multiple Marriages
If your ex marries multiple times:
If you marry multiple times: