What Happens to My Retirement Account After a Divorce?

Divorce-related retirement account divisions are subject to various rules.

Since they are marital assets, retirement accounts in Georgia are subject to equitable division upon divorce. Only the increase during the marriage is marital property. If Wife’s 401(k) contains $25,000 when she gets married and $50,000 when she gets divorced, $25,000 is subject to equitable division. Significantly, “equitable” is not the same thing as “equal.” Therefore, spouses have some options in this area. More on that below.

This question is very important, and not just because retirement accounts are normally large financial assets. These accounts also have significant emotional value. They represent financial security in the future, as well as a reward for long-term savings. A Norcross family law attorney must address these financial and emotional issues when dividing a 410(k), IRA, college savings plan, or other long-term savings account.

Equitable Division Factors

Usually, a Norcross family law attorney settles equitable division matters out of court. Judges usually approve such settlements if they adhere to the legal property division factors, which include:

• Marital Standard of Living: Divorce is a financial burden on both spouses. The equitable division rule prevents divorce from being an unfair financial burden on either spouse.
• Future Earning Potential: Roughly the same principles apply in this point. Older, unhealthy, and/or poorly educated people usually have less earning power and therefore might need more retirement savings now.
• Custody of Minor Children: Children are expensive, especially in the late teen years. Residential parents often need access to savings when these large bills come due.

These factors do not just apply to assets like retirement accounts. They may also reduce the amount of marital debt an ex-spouse must repay, like an existing loan against a retirement account.

Marital property division is usually a one-shot deal. Settlements and judgments are difficult to undo.

Practical Considerations

Frequently, for financial and/or emotional purposes, one spouse wants to keep a larger share of a retirement account than the aforementioned factors might allow.

Offsets are an option in this area. For example, Husband might agree to pay additional spousal support if Wife gives up a greater share of a retirement account. Such offsets are quite popular since Georgia law is extremely flexible in this area.

All long-term savings accounts have plan administrators that set plan division rules in accordance with Georgia law.

Speaking of rules, we should mention that military retirement accounts work differently. The government divides these accounts 50/50 if the marriage lasted at least 10 years and the servicemember spouse had at least ten years of service during the marriage. Roughly the same rule applies to other military retirement benefits.

Non-employee spouses have several distribution options, once again depending on the plan rules. Cash-outs are usually available if the non-employee spouse pays a penalty. Non-employee spouses can also do nothing and receive a proportional share of future payouts. Normally, spouses who choose this option cannot make future contributions.

Because of these significant cons, most non-employee spouses roll the balance into a new retirement account. No penalty applies, and future contributions are optional.

Reach Out to a Gwinnett County Family Law Attorney

Divorce-related retirement account divisions must follow certain rules. For a consultation with an experienced family law attorney in Norcross, contact Zimmerman & Associates, Attorneys at Law. We routinely handle matters in Fulton County and nearby jurisdictions.