What Happens to My Retirement Accounts After My Divorce?
Among the emotional toll that a divorce takes, there are difficult administrative and financial decisions
to make. How will custody be determined? Can either of us continue living in our house? And, to make
matters more complicated, what happens to my retirement accounts?
In Michigan, judges are required to divide assets fairly, which typically starts with a 50/50 distribution of
marital property. But, in some cases, they divide property differently to achieve fairness. The judge will
consider many factors, such as the length of the marriage, each spouse’s financial contributions during
the marriage, and each spouse’s needs.
Are retirement accounts and pension plans marital property?
Yes. The part of a retirement plan that was accrued during the marriage is marital property, and may be
divided. This includes 401k plans, IRAs, pension plans from employers, and any other type of finances
set aside for retirement.
So, how will these accounts be split during my divorce?
Sometimes, the divorcing spouses may agree to not divide their retirement plans and to each keep their
own. But if this does not happen, there will be a court order to look into the retirement plans and
specify how the accounts will be split between the parties.
To determine a fair split, a financial planner and an attorney will determine the value of the retirement
accounts at the time of the divorce. 401k plans and IRAs may be divided in such a way where a
percentage may be owed from one spouse’s account to the other’s account.
Because pension plans are not usually collected until after retirement and do not involve funds currently
sitting in an account, then pension specialists will consider what the plan is worth now and what it will
be worth in the future. However, pension plans are also subject to division.
What are some other financial considerations?
While dividing assets, it’s important to make sure you protect yourself from tax liabilities. Be sure to
discuss any retirement withdrawals with a financial advisor or accountant.
As with all divorces, the challenges that arise will vary depending on the process. If you and your ex-
spouse can agree on ways to divide assets, then the judge will review your settlement to make sure it is
a fair split of marital property and will typically move forward with what you have decided. If you cannot
agree, then the judge will decide for you based on a variety of factors such as financial and familial
contributions throughout your marriage.
With either path, the only thing that is guaranteed in divorce is that it will take time and paperwork.
Having an attorney like the trusted team at Striegle Law can decrease confusion and help you through
this complicated process. Call our team today for your free consultation.