Retirement accounts are considered marital property in Wisconsin. Thus, they should be equally divided between spouses. Usually, this means that spouses who depend on the contributions of their spouse for their retirement funds will have to adjust their retirement plans. But a spouse can recover from the impacts of their divorce when they make smart decisions and plan strategically with a Karp & Iancu, S.C. divorce attorney.
How to Divide Retirement Accounts as Part of Divorce Agreements
If spouses are negotiating on how they should divide their property, their agreement can include letting every party retain the total amount of a retirement account under their name while offsetting value differences with other assets.
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If retirement accounts must be split for marital assets to be divided equally, spouses must get legal documents to ensure early withdrawal penalties and taxes will not decrease their retirement assets. Typically, a Qualified Domestic Relations Order (QDRO) is required to divide a pension or 401(k). Meanwhile, a transfer of incident to divorce is required for dividing an IRA.
Other Ways to Adjust Retirement Plans
If a divorce outcome has greatly decreased the couple’s retirement savings, they can get their retirement back on track by:
- Looking for more income sources. Those who depended on their spouse for their retirement plan shoulder furthering their education or finding opportunities to advance their career. This way, they can increase their personal income they contribute to their retirement.
- Delaying the retirement date. Waiting for more years before retiring allows a spouse to build up the savings they lost in the divorce and live their desired life during retirement.
- Increasing retirement contributions. Increasing one’s retirement contributions every month can make up for the financial impact of a divorce. This gives a spouse control over their planned retirement date.
Rebuilding One’s Retirement Savings Following a Divorce
The breakdown of a marriage can trigger serious financial consequences. Once the dust settles, you must review your current financial situation. Transitioning to living on just one income is often hard, especially if you used to live on two or depended on spouse. You must calculate your new expenses for each month and compare this to the amount you make. This allows you to set a budget. Then, you can adjust your retirement contributions, risk profiles, and allocations. Compare your retirement fund amount to the amount you want. Then, determine the amount you must save to achieve your retirement goal. If possible, increase your investment or retirement contributions.
