Protecting Your Retirement Savings During a Divorce

Divorce can be one of the most challenging times in someone’s life, especially when high assets are involved. Financially protecting yourself during a high-asset divorce is imperative. You must ensure you’ve got enough saved to last through retirement and won’t have to worry about other financial obligations.

Here is an exploration of ways you can keep your retirement safe in a divorce.

Nevada’s Property Division System

Nevada uses the “community property” model in a divorce. This is a process where all the jointly-acquired assets and debts are divided between the two spouses. The goal is to split the marital assets equally, 50/50.

Therefore, retirement savings can also be subjected to this split.

Dividing Retirement Savings in a Divorce

Ultimately, the court must determine whether your retirement is considered community property or separate property. If you accumulated the savings during the marriage, the court could give half to your spouse. Assets from before the marriage may remain separate.

In Nevada, you will likely share any retirement savings you accumulated during the marriage.

Utilizing a Good Financial Plan

By now, it should be clear that retirement is something that courts can divide in a divorce. This is especially true in community property states like Nevada, where you traditionally owe your spouse half the value of any property you keep.

Therefore, you must take alternate routes to protect your retirement assets. Your starting point is creating a solid financial plan.

A sound financial approach should include your income, savings, and expenses. Then it accounts for how these finances will change post-divorce. Additionally, all investments should be properly reallocated to reflect each party's financial situation following the dissolution of the marriage. You can then use the money you have to invest in appropriate retirement fund options. These should not be high-risk investments. They should be stable as you will rely on them later.

Tax Implications of Dividing Retirement in a Divorce

Withdrawals from these accounts such as 401(k)s and pensions may be subject to fees. These include early withdrawal penalties and changes in income taxes. You must consider this fact when dividing your retirement, as it affects your ability to use this money.

Fairly dividing assets fairly goes beyond just making sure everyone gets their 50%. It also includes the impact of certain accounts. Working closely with legal and financial advisors can help ensure that your agreement accounts for the tax implications. Understanding these issues before you finalize can save both parties headaches in the future.

Negotiate With Your Spouse to Keep Your Retirement

When negotiating divorce terms, try to keep communication business-like. Ultimately, you are trying to negotiate a business deal with your former partner as if you were negotiating a deal. Both spouses can sit down together and outline what they expect from each other. This protects you from hidden surprises. An unemotional, pragmatic negotiation can empower both spouses to walk away satisfied, having their needs met.

Mediation can help with this process. It allows the spouses to work with an impartial legal professional who can keep the conversation moving and on task.

Ford & Friedman is here to help you find ways to keep your retirement savings healthy after a divorce. We are ready to hear from you, so call us today at (702) 904-9898 or contact us online.