How to protect your retirement in a divorce

On Behalf of | Apr 28, 2023 | Family Law

Divorce is rarely an easy process. It has both emotional and financial implications that you may not understand until after you file.

One of those implications is its impact on your retirement. Therefore, these are some strategies you may use to protect your retirement during a divorce.

Review your pension or retirement plans

First, you should understand any penalties and taxes that you may incur if you take money out of your retirement early. You should also investigate your distribution options. Some plans offer one-time payments, while others provide annuity-type payments over time.

In addition, some plans can split the payment and send half to you and half to your spouse. You may also have a single-life payout, where only you receive the benefits while you live, or a joint-life payout, where your spouse receives payments after your death. This information is important for your negotiation.

Learn your state laws

Every state is either a community property state or an equitable distribution state. California is a community property state. This means that every asset you acquired during your marriage, whether you paid for it or not, is equally owned by both you and your spouse. This means that the money you invested in and earned on your retirement during your marriage belongs to you and your spouse equally.

In addition, any money your spouse invested during your marriage can offset your investment. Therefore, if you both invested $50,000 and you earned $2,000 while your spouse earned $1,500 in interest, you may only have to split the additional $500, which is easily negotiable.

To protect your retirement, make sure you have all the information you need and stay open to negotiation. You may lose something you really wanted, but your retirement will remain secure.

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