How do you split retirement savings during divorce?

It's one of the hardest things to do: splitting up your retirement savings during divorce. Much of what you have saved up to this point may be subjective; the funds are there now, but will they be there in the future? Retirement accounts often rely on the stock market, investments and factors that could vary from day to day.

Splitting up your retirement account during a divorce may make you feel like you are hurting yourself in the long-term. Some people deal with this by buying their spouses out of the retirement fund by giving them other assets. For instance, if you have a $200,000 retirement fund, you might offer your spouse your home instead, since it's worth $100,000 outright. Retirement accounts could go up or down in some instances, so variable accounts would be riskier to wait for than taking a home, as an example.

Other people choose to split their retirement funds by a percentage. For instance, your court documents may state that, upon retirement, you and your ex will split your retirement income 50-50. On the other hand, you may instead state that you'll pay a certain dollar amount each month to your ex-spouse for retirement or in a lump-sum payment.

Retirement income also has to be split correctly. Splitting it incorrectly could lead to penalties and taxation. Make sure you split accounts, like 401(k) accounts, incident to divorce. This helps prevent unfair penalties for early transfers or the removal of funds.

Every retirement account is different, so your attorney may need time to review your accounts and determine the best way to divide those assets. The right division could help you stay financially stable in the future.

Source: Fidelity, "Divorcing? How to split up retirement nest eggs," Duncan Ralph, accessed Feb. 22, 2018

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