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Are you at risk of losing your retirement savings in a divorce?

On Behalf of | Jun 27, 2024 | Family Law

Divorce can bring many uncertainties, especially concerning finances. One of the biggest concerns is the potential loss of retirement savings.

Understanding the risks and knowing how to protect these assets can help safeguard your financial future.

How divorce affects retirement savings

During a divorce, courts often divide assets between spouses. Retirement savings, whether in 401(k)s, IRAs or pensions, usually count as marital property. This means that both spouses may have a claim to these funds, regardless of whose name is on the account. The division depends on various factors, including the length of the marriage and the financial contributions of each spouse.

Equitable distribution in Indiana

States follow different rules for dividing assets. For the purposes of marital asset division, Indiana is an equitable distribution state. This means that the court divides assets in a way that is fair and equitable but not necessarily equal. Factors such as the length of the marriage, each spouse’s financial situation and contributions to the marriage play a role in this division.

Protecting retirement savings

There are several ways to protect retirement savings during a divorce. The first step is to understand the value of all retirement accounts. Gathering statements and understanding the specifics of each account helps in negotiations and settlements.

Keeping individual contributions separate from marital funds can also help protect retirement savings. For example, if one spouse inherits money or receives a gift, keeping these funds in a separate account can prevent them from becoming marital property.

Pre-nuptial and post-nuptial agreements

Multiple types of marital agreements can clearly define how to handle retirement savings in the event of a divorce. A pre-nuptial agreement is a document couples sign before marriage, while a post-nuptial agreement is one you can make after the marriage takes place. Both can specify that retirement accounts remain with the original owner.

Divorce can pose a risk to retirement savings, but understanding the laws and taking steps to protect these assets can help. Whether through agreements or careful financial planning, safeguarding retirement savings ensures long-term financial stability.