Skip to Main Content
Litigation Blog.
The seasoned lawyers and litigators at The Rubinstein Law Firm are here to share their insights with you.

The impact divorce has on retirement savings

Retirement accounts may be the most frequently overlooked asset in a divorce. These savings are often quite valuable on their own. But because of their generally private nature and long-term promise, separating spouses do not always prioritize them as they should.

Failing to properly account for your retirement is one of the costliest mistakes you can make. As one recent research report makes clear, protecting your interest in these funds is of the utmost importance.

How divorce impacts retirement savings

The National Institute for Retirement Security recently published data that demonstrates the bite a divorce can take out of a retirement account.

One example: For a married man, the mean value of an independently owned, defined contributions account is $84,874. For a divorced man, that figure drops to $58,951. The disparity is just as stark for women, who fall from $50,126 while married to $38,613 after divorce. This drop-off tends to be less precipitous for younger women, but becomes more severe with age.

Why is there such a significant loss? There are a few potential reasons:

  • A loss of income following a divorce means it may be harder to save money
  • A divorce that drags on can become more expensive
  • The retirement account was split during property division

Whatever the case, the plummeting retirement accounts underscore the importance of protecting your interest in those assets during divorce.

Dividing retirement accounts

Generally speaking, any money during the marriage that is put into a retirement account – be it a pension, 401(k), IRA or something else – will be considered marital property. This means it is subject to the same property division rules as other marital property.

There are a handful of potential ways to deal with retirement funds in divorce, with the precise answer often defined, in part, by the type of account. Whatever the case, you should approach the situation with the goal of holding on to your rightful interest in these funds. They are likely the most significant part of your nest egg.

It’s often beneficial to discuss this with your now-former partner during divorce negotiations. A satisfactory solution – maybe splitting all retirement accounts 50-50, or having the higher earner compensate the lower earner until things are even – may be reached. If that does not happen, the question of how to divide all your assets will likely be left to the courts.

Retirement accounts are far too valuable. You do not want to take a chance with them. By making your financial future the priority, you can help prevent a host of long-term issues.