The looming possibility of divorce can make people feel very insecure about the future. Some people try to rehabilitate unhappy marriages simply because they don’t want to gamble with their parenting time and would rather wait until their children move out to end their marriage. Many others feel like financial vulnerability is what keeps them tethered to an unfulfilling marital relationship.
No one wants to give up a financially secure and comfortable retirement to have to work for the rest of their life, which is exactly what people worry could potentially happen if they divorce. Especially for those considering divorce in their late 50s or beyond, the possibility of the divorce proceedings diminishing their standard of living during retirement could be a real concern.
Retirement savings might be marital property
The longer people have remained married, the better the chances that at least some of their retirement savings are at risk of division. Some couples have marital contracts, like prenuptial agreements, which describe what will happen to specific resources, like retirement savings accounts, should either spouse file for divorce.
Those who do not have a pre-existing written agreement may have to look at the financial records for the account. As a community property state when dividing assets in a divorce, Washington will treat income earned during a marriage or any assets acquired during the marriage, like interest accrued on a pre-existing account balance, to be part of the marital estate. Whatever amount people add to their retirement savings during the marriage will potentially be subject to division in the divorce. Exactly how much of the account balance will go to each spouse, however, is very difficult to predict unless spouses reach an agreement with their own terms.
If the courts order someone to divide their retirement savings account or if they agree to do so with their spouse, they can potentially use a qualified domestic relations order (QDRO) to divide the account. The right paperwork can help people avoid penalties and taxes that they would otherwise need to pay when making an early withdrawal from a retirement savings account.
A few extra years of contributions or a new budget tailored to retirement could allow someone to move forward with a divorce while still feeling confident that they can retire comfortably in its aftermath. Understanding what happens during property division proceedings may help people feel more comfortable with the idea of a Washington divorce.
