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Dividing retirement assets during divorce takes time

When people who have been married for a long time decide to get a divorce in Arizona, they likely have many marital assets to divide. Retirement savings plans from work, like 401(k) plans and pensions, as well as Individual Retirement Accounts often represent significant assets that might require weeks or months to value correctly. Before plan administrators can distribute funds, they also need a court order called a Qualified Domestic Relations Order to release the money as part of a divorce settlement. The parties cannot simply request the funds themselves without going through the court on certain types of plans.

As former spouses negotiate how to split retirement savings, they should take time to consider issues like taxation and lifestyle adjustments based on a single income. Distributions of retirement savings could impose income tax and a 10 percent early withdrawal penalty depending on their ages. A person might get a break on the penalty if the proceeds are needed to buy a new home, but rolling over funds into a new qualifying account may be necessary to avoid taxes.

Social Security benefits form a separate concern. A divorce settlement does not divide those future benefits, which remain based on the income level of the individual earner. A person who worked part time and will have a low Social Security benefit compared to a spouse who earned more might wish to address that issue during negotiations. The person who expects to receive more Social Security might offer other assets or short-term alimony payments to offset the difference.

Someone pursuing a divorce may wish to consult an attorney to get specific information about rights to certain assets. This could be especially important during a high-asset divorce. Knowledge of legal rights might help a person recognize financial opportunities and negotiate an equitable settlement.

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