Regardless of how close or far away retirement might be for a Virginia couple, divorce could make a significant dent in their retirement savings. Further complicating matters may be the fact that it can be difficult to set aside emotions during divorce negotiations. However, this will be necessary to ensure future financial security.
Spouses may have IRAs, pension or 401(k) accounts. Whether or not the account was established prior to the marriage, both spouses may be entitled to a portion of the funds. When looking at the value of an IRA, it’s important to keep in mind that withdrawals before the age of 59 1/2 are penalized. To divide a pension or 401(k) as part of a divorce settlement, it is necessary to have a document called a qualified domestic relations order. This is not needed for an IRA.
Social Security does not need to be negotiated as part of the divorce agreement. If the marriage has lasted 10 years or longer, a lower-earning spouse might be able to draw benefits on the salary of a higher-earning spouse. Lower-earning spouses have a choice of either drawing benefits on their own earnings or getting half of the benefits based on a spouse’s earnings. This does not affect the benefits that the higher-earning spouse receives.
Even in a high-asset divorce, retirement savings often are one of the more significant assets. However, there may be a number of other complex investments that must be divided as part of the divorce. For example, if one person owns a business, the owner might need to buy out the spouse. Real estate investments and valuable art or other types of collections may also present complications as they may need to be appraised and sold. Legal counsel could help a couple with the property division process.