An Attorney Who Has Walked In Your Shoes

What will happen to your retirement savings after your divorce?

Divorce is an intimidating and complicated process. It affects the individuals involved immensely, emotionally and financially. Even if you feel the divorce is in your best interest, there will likely be a grieving process as one chapter of your life ends and another begins. While only you can push through the emotional challenges, the legal and financial ramifications are another matter. Seventy percent of divorces in Massachusetts happen without a lawyer, but a do-it-yourself divorce is not in your best interest.

There are many reasons why representation is a good idea, but key among them are the complex financial considerations at play. One of those considerations is your retirement savings. You may not realize that your retirement savings are eligible for marital property distribution, according to Massachusetts divorce law. If you contributed to a 401k, IRA or pension during your marriage, the portion you contributed must be divided between you and your soon-to-be former spouse. It won’t necessarily be a half-and-half split. Judges consider many factors when allocating assets according to Massachusetts fair and equitable—but not necessarily equal—property division policy.

Why you need a lawyer to preserve your assets

Many people do not understand how to divide their retirement assets legally and suffer hefty financial consequences for a do-it-yourself approach to divorce. You could end up with a large tax bill and penalties if the division is not done correctly with a qualified domestic relations order (QDRO). You file this order with your divorce papers. It allows the distribution of assets without penalties to a recipient other than the person named on the account. A lawyer can draw up this document for you.

With a QDRO, you can not only save money on penalties but also on taxes if the higher-earning spouse passes the money to the other spouse, and it ends up in a new tax bracket. The money won’t be subject to as high of a tax percentage.

Can you lose your right to this payout?

If you remarry, your eligibility for these assets may change. Massachusetts laws prevent former spouses from ever receiving a pension payout from their divorce if they remarry. If you come to a place where you are seriously considering remarriage, it’s best to cash out your retirement savings early and take the penalty at that time than to lose it all.

Allowing a lawyer to help protect your assets and file your paperwork is in your best interest. They’ve studied the laws, so you don’t have to.