It is never too late in life to make a change for the better, and for some, this means ending an unhappy marriage. Increasingly, Minnesota couples are pursuing divorce later and later in life as they seek to make their remaining decades the happiest they can be.
While divorce virtually always has certain financial implications, these are often more profound if you are age 50 or older. This is especially true when it comes to retirement savings, which you will have to split up during asset division.
I earned my retirement savings, shouldn’t it stay with me?
Many people wrongly believe that retirement savings accounts belong only to the person who financially contributed. However, when one person in a marriage saves for retirement, they generally do so with the intention of supporting both spouses. Because of this, retirement savings accounts are almost always marital property.
Any retirement funds that you saved before you said, “I do” are still your personal property that you will not have to include during asset division. Prenuptial agreements may also outline that certain retirement funds are solely your personal property in the event of a divorce.
How much tax will I have to pay when dividing my 401k?
Retirement savings encourage you to set money aside and leave it alone for the years leading up to retirement, thus creating a nest egg for when you finally stop working. Penalties and hefty taxes usually create an undesirable hurdle to early withdrawals, so most people leave their retirement savings to grow through their own contributions, employer matches and interest.
However, now that you are divorcing, you need to divide and withdraw some of those funds. To avoid early-withdrawal penalties and taxes, you must have a qualified domestic relations order. A QDRO allows you to make necessary withdrawals due to divorce without incurring additional fees that strip away the value of your savings.
You can minimize the financial impact of your divorce
Retirement savings are some of the biggest investments people in Minnesota will ever make, and it can be overwhelming to divide these accounts.
You can ensure that your financial interests — including retirement savings, marital bank accounts and more — are protected by remaining vigilant throughout divorce proceedings. Most people find that approaching divorce under the guidance of a lawyer who is familiar with Minnesota family law helps them reach a divorce settlement that protects their best interests.