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How to protect your retirement in a high-asset divorce

On Behalf of | Dec 7, 2023 | Divorce

Divorce is never easy, especially when you have significant assets. One area that requires careful consideration is your retirement savings.

Protecting your financial future is important during this challenging time.

Understand your retirement accounts

Did you know that the divorce rate decreases as income rises from 40% to 30% and even 25% after incomes rise beyond $600,000? However, if you seek a high-asset divorce, you should do what you can to secure your typically much larger retirement accounts. Begin by gaining a clear understanding of these accounts. Identify all the assets earmarked for your retirement, including 401(k)s, IRAs and pension plans.

Evaluate the marital and non-marital components

In many divorces, courts only divide the assets acquired during the marriage. Therefore, you need to differentiate between marital and non-marital assets. If you had retirement savings before the marriage, that portion may be non-marital and protected from division.

Consider a qualified domestic relations order

A QDRO is a legal document that outlines the division of retirement assets between spouses. This order can be instrumental in ensuring a smooth and fair distribution of retirement benefits. Consult with a financial professional to understand the tax implications and potential penalties associated with the division of these accounts.

Explore offset options

Instead of dividing retirement assets directly, consider offsetting their value with other marital assets. This strategy allows you to retain your entire retirement savings while providing your ex-spouse with an equivalent value in other assets. Thoroughly assess the fair market value of each asset involved in the offset to ensure an equitable arrangement.

For the best results, take proactive steps to protect your retirement. You can gain security and safeguard your financial future.