Going through a divorce isn’t only emotionally taxing but financially draining as well. One of the most significant concerns for estranged Washington couples who are in this unfortunate predicament is protecting their retirement savings. Divorce can deliver a blow to your retirement planning, and it is crucial to take steps to safeguard any assets set aside for retirement.
Understand your state’s laws
State laws vary when it comes to dividing assets in a divorce, including retirement assets. Some states, including Washington, are considered “community property” states, which means that all assets acquired during the marriage are divided equally between both spouses. Other states follow an “equitable distribution” model, where assets are divided fairly but not necessarily equally.
Know what retirement assets are marital property
Determining which of your retirement assets are considered marital property will help you protect your financial interests. Marital property is generally defined as any property or assets acquired during the marriage.
Retirement assets can include 401(k) plans, IRAs, pensions and other retirement accounts. It is crucial to know which of your retirement assets are marital property and which are separate property, as only the former can be subject to division in a divorce.
Consider a Qualified Domestic Relations Order (QDRO)
A Qualified Domestic Relations Order (QDRO) is a legal document that outlines the division of retirement assets in a divorce. A QDRO allows you to transfer retirement assets from one spouse to the other without incurring tax penalties or early withdrawal fees.
Reevaluate your retirement plan
Reevaluating your retirement plan after a divorce and making any necessary adjustments will help keep your goals up to date with your current situation. This may include reevaluating your retirement goals, your investment strategy and your retirement income needs. It is also recommended that you update your beneficiaries on any retirement accounts and make any necessary changes to your estate plan.
Don’t risk your future
Protecting your retirement after a divorce requires attention to detail. With the right planning, you can protect your retirement assets and ensure a secure financial future.