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Dividing retirement accounts during a divorce

On Behalf of | Feb 19, 2021 | Divorce

One of the most challenging aspects of any divorce in Florida is dividing assets. For many couples, that’s difficult. It involves not just cash but also things like the family home. Even retirement accounts and pensions are affected. In some cases, this becomes very complex. For example, there are strict rules about the division of military benefits. Even for people who work in the private sector, dividing retirement benefits can be a challenge.

How benefits are defined

Savings plans like 401(k)s and IRAs are called defined contribution plans. The worker, or their employer, makes contributions to these accounts. Sometimes, both parties do. One example of this is company matches for 401(k)s or 403(b)s. Profit-sharing plans can be considered, too. IRAs are a little different: Often, people who run small businesses or freelance have individual retirement accounts.

Pensions are funded by employers. Contributions to a pension plan are based on things like an employee’s length of time with the company. Other considerations include the employee’s salary history. Pensions are paid out once the worker retires. Usually, these are monthly distributions.

Dividing retirement accounts requires that they be valued. On the surface, this sounds simple, but the performance of a 401(k) can vary based on fluctuations in the stock market. Once a value is determined, the asset has to be divided.

Alternatives to dividing accounts

Florida is an equitable distribution state. This means a distribution may not be exactly equal, and sometimes, it’s possible to side-step the issue of dividing retirement accounts. A large asset like a home can be given to one party in exchange for not getting part of a retirement account. Having an attorney who understands property and asset division is very important in this process.