What happens to retirement savings in a Colorado divorce?
Experts typically recommend setting aside at least a million dollars or multiple years of someone’s salary income to cover their expenses during retirement. Married couples may be able to share housing expenses and other costs while also combining both of their incomes or slowly building two separate retirement accounts.
Married couples may have an easier time balancing their budget to set money aside and can also reduce what it costs per person to live comfortably during their retirement years. Unfortunately, even those who have saved assertively throughout their lives may be at risk of being unable to retire if they divorce, especially if they divorce quite close to the age of retirement.
Spouses typically split their savings
Unless people already have a contract related to the division of their property or support after a divorce, they will either need to negotiate a property division settlement with one another or ask a judge to divide both their assets and their debts. The rule for property division in Colorado requires an equitable or fair approach that considers the earning potential and health of each spouse, the length of the marriage and also the contributions each party made to the family.
In many families, at least some of the retirement savings set aside by either spouse will be subject to division. Any amounts added to the account during the marriage, including interest and employer-matching contributions, could potentially influence the outcome of property division decisions. Although it is not always necessary to divide retirement accounts so long as spouses consider their value, dividing the accounts is often the simplest means of sharing their total value.
The good news is that an account division that occurs as part of a divorce will typically not result in any penalties the way that an early withdrawal might. One of the lawyers will draft a qualified domestic relations order (QDRO), and after its approval, the spouses can potentially split the account into two separate accounts without losing any of the balance to penalties or taxes.
Those who have a realistic idea of what property will influence the asset division process in a Colorado divorce will likely have an easier time achieving their goals and avoiding unnecessary conflict in pursuit of unachievable outcomes. Establishing how much of a retirement account is marital property can be an important first step for those who are preparing for a complex Colorado divorce.The post What happens to retirement savings in a Colorado divorce? first appeared on Fuller & Ahern, P.C..