Retirement accounts and pensions are often among the most valuable marital assets. Both spouses may accrue pension funds or 401(k) matching contributions during their working years that can help ensure their financial stability after they cease working full-time
Frequently, those resources are in the name of only one spouse. Are 401(k)s and retirement savings accounts divisible when people divorce, or does each spouse simply keep the account in their own name?
Marital contributions are divisible
Typically, spouses share their income during marriage, which means they share any resources acquired with marital income as well. Both pensions and retirement savings accounts are likely at least partially marital property.
Any contributions made during the marriage are subject to division when spouses divorce. Spouses who settle their property division matters can potentially set their own terms by working cooperatively. They might agree to have each spouse retain the accounts in their own names. Other times, they might agree to divide each account.
Spouses can also theoretically use responsibility for marital debts and the allocation of other marital property to balance decisions regarding retirement savings and pension resources. Spouses may need to plan carefully to minimize penalties and optimize what they can retain for their golden years, especially if they are already close to retirement age when they decide to divorce.
Working with a lawyer to evaluate marital resources and negotiating a property division settlement can help people ensure the outcome of an upcoming divorce is as fair as possible. Retirement accounts and other assets with long-term financial implications typically require careful consideration when preparing to legally end a marriage.