When you started saving for retirement, chances are you planned to remain married to your spouse throughout retirement. You were careful when you determined your costs and expenses, but you were expecting to maintain one household while receiving retirement benefits, pensions or Social Security for both spouses. Now that you’re looking at divorce, you aren’t sure what will become of you during retirement, or if that will even be an option for you.
For some spouses, especially those who stayed home for years to raise children, the thought of divorcing close to retirement age is frightening. After all, no matter how much work a stay-at-home parent does, he or she does not accrue Social Security or matching pension contributions during that time. The primary wage earner may very well be the only person whose name is on the retirement account. Thankfully, Ohio’s divorce laws protect the rights of both spouses.
Most retirement funds can be split in divorce
Whether you have an employer-sponsored 401K or your own Roth IRA account, chances are it will end up divided in your divorce. Unless you have a prenuptial agreement on record assigning retirement accounts or pension benefits to one spouse, the courts will likely split them. You won’t have to worry about early withdrawal penalties or tax fines. With a court order, you can avoid all of those fees when splitting the account as the result of a divorce.
Ohio is an equitable division state, which means the courts will try to find a fair way to divide assets and debts between spouses. Generally, assets and debts obtained during the marriage are shared by both. Assets from before the marriage, inheritances or gifts are typically excluded. In the case of retirement accounts, if the account existed before the marriage, only the deposits made during the marriage would be subject to division in most cases.
You may have to reconsider when and how to retire
Unless you have massive saved assets, dividing your retirement account could mean changing your plans and expectations for retirement. You may need to delay retiring for several years or even an additional decade. In some cases, retirement may not be a viable financial option. However, for many people, a few extra years of work may be enough to allow for basic retirement at a later date.
Sometimes, retirement can work with some changes to your plan. You may need to consider living with your children, getting a roommate or moving to a cheaper neighborhood. You may also need to scale back on plans for your retirement, such as travel. If you look honestly at your expectations and resources, you can typically find a workable plan, even if you do need to compromise your hopes for your retirement.
