Retirement plans such as 401(k)s, Individual Retirement Accounts (IRAs) and pensions are marital property even if the account is in one spouse’s name. As a result, the courts split these accounts between both spouses.
Planning for the division of your retirement assets helps you avoid additional fines and ensures you have enough money set aside for yourself.
Understanding equitable share of retirement benefits
One spouse may have contributed to an employer-sponsored retirement account during the marriage. The savings deposited to the fund were a portion of that spouse’s income, which is marital property. Since marital income went into the account, the balance belongs to both people. As an equitable division state, judges in Minnesota decide how much each spouse receives from the retirement account.
Avoiding penalties when withdrawing retirement funds
Traditionally, banks charge fees for the early withdrawal of funds from retirement accounts. In divorce, the spouse who receives a portion of the funds can roll the balance into an individual retirement account. Neither spouse has to pay taxes or early withdrawal penalties on the money by doing this.
Making vital adjustments in your career after divorce
Since your retirement benefits may not be as much as anticipated, you might need to work past your expected retirement date. This approach is necessary for you to:
- Recoup some of the savings that went to your spouse
- Save more since your spouse is not contributing to future living expenses
- Continue paying child or spousal support payments out of a salary instead of your retirement benefits
Divorce can disrupt your retirement plans, prolonging your career and limiting your finances. Advanced planning ensures you can live comfortably in retirement.