How is my Retirement Affected by Divorce?
Posted in Divorce on June 26, 2023
The retirement dream may feel like a mirage on the horizon that you will never reach, but it gets closer daily. We set our life on track, get married, and feel secure in our trajectory until a planned or unexpected divorce derails us. Now the difficult task of dividing the accumulations of life lies before you, and the path looks unclear.
There are the physical assets that need to be divided, but there are also those funds, savings, and retirement plans that you have been investing in for years that must be considered. The asset division process can become exceedingly complicated even under amicable circumstances because of laws and guidelines surrounding the distribution of retirement money. There is no need to guess at the process when the Solana Beach divorce attorney team of Ratzer|Dobis can work to secure your retirement savings, helping you to begin again and successfully reach your retirement goals.
Your Retirement After Divorce
California is a community property state which provides for any assets, including retirement savings, to be divided equally under California law. Community properties are assets a couple accumulates from marriage until separation is filed. The type of retirement and savings plans you contributed to will determine the course of action for dividing retirement assets.
As important as the division of assets, it is critical to understand if any penalties or percentage decreases will be applied because of the division method. The complicated division of retirement assets takes complex legal experience to maneuver effectively so that your retirement assets remain intact. Speak to a California divorce attorney at Solana Beach if you have invested or contributed to the following savings plans and are preparing for a divorce.
- IRA
- 401K
- TSP (Thrift savings plans for federal employees)
- CalPERS (California public employees retirement system
- CalSavers
- Pension plans
- Social security
- Annuities
This list is not exhaustive, so working with a California divorce attorney to review your retirement savings plans is imperative.
How Retirement Savings Are Divided
There are generally two methods of division for pension plans.
Reservation of Jurisdiction
This division method allows the spouse of the employed partner to collect a portion of each pension check after the employed spouse retires. A formula generates the percentage of community property distributed to each partner on a regular basis.
Cash-Out
It is also possible to have your pension plans evaluated and an assessment of your other community properties performed. The employed spouse would keep the entirety of the pension plan and reimburse an equal portion of other community property to their spouse. This method is a less common form of division but can be an option.
Qualified Domestic Relations Orders (QDROs)
A QDRO is issued in a divorce to specify how a retirement plan administrator must divide savings between spouses. These orders are necessary to divide specific savings plans governed by federal law, such as:
- Thrift plans
- Employee stock ownership plans
- 401(k)s
- Tax-sheltered annuities
- Profit-sharing plans
An additional option for funds regulated by federal laws is a buy-out. Any of these processes take the forethought and complex understanding that a California divorce attorney with detailed legal knowledge of retirement savings plans can help you sort through.
Retirement Plans as Single Property
You may be someone that has planned for retirement early on, and the savings process began before you were married. Any retirement savings and interests on that money will most likely qualify as separate property or property belonging to you and must be evaluated differently than community property.
A Course of Action for Divorce and Retirement in San Diego County
Retirement after divorce needs a well-crafted plan to preserve your retirement assets, making it possible to enjoy the time you have worked toward all your life. Understanding the actions required for dividing retirement plans in a divorce can be overwhelming and burdensome. Preserving your retirement can be as simple as an investment in a trusted Solana Beach divorce attorney.
We value the opportunity to provide a quality service to you during a stressful life event. From the initial consultation, you can feel confident that Ratzer|Dobis is on your side to help you achieve your goals for a solid future and retirement.