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Splitting retirement accounts in divorce: Remember these points

There is a lot to think about during the divorce process, with property division placed high on your priority list.

In the past, the family home was the biggest sticking point when dividing assets. While this is still important, retirement accounts should also command a lot of your attention.

This can include but is not limited to: individual retirement account (IRA), 401(k), stock bonus plan and profit sharing arrangements.

Since retirement plans are typically split in a divorce property settlement, there are some things you need to know:

  • Your ex may attempt to take all retirement benefits, such as by offering you something of comparable value (like the family home) in return. Be sure to understand the pros and cons of this trade off.
  • There are tax implications. If you're going to split retirement accounts, it's imperative to understand the tax implications both now and in the future.
  • There is more than one way to split a retirement account. For example, a qualified domestic relations order (QDRO) can be used when splitting a 401(k), but it's not necessary for an IRA.

Retirement accounts are a big deal, as the money you have saved will go a long way in helping you live the life you want after you hang up your work boots.

If you're moving forward with divorce, pay close attention to your retirement accounts and the best way to fight for what you deserve. You have legal rights, and you need to protect them throughout the process. You don't want to make a mistake that could have a negative impact on your finances in the future.

Source: Key Bank, "Splitting the Retirement Accounts," accessed June 14, 2018

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