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Divorce after 45: Three things you should know about the impact on retirement savings

retirement in divorce

Texas is a community property state. This means that you and your spouse must divide the martial estate when you end the union in a just and right manner. In Texas courts, this usually means the marital property will be divided 50/50. Marital property includes almost everything that you and your spouse acquired during the marriage including your retirement savings. You will need to identify all your property and assets as well as your debts. Both spouses must provide financial disclosures so that assets can be distributed fairly.

1.      Retirement

Even though retirement accounts 401(k) and individual retirement accounts (IRAs) only have one sole account holder, all the money deposited into those accounts are community property and are subject to division. That  means  even though you spent all your time slaving away at work saving retirement money your spouse, who did not work those hours, also has an equal interest in those retirement savings along with all the interest, dividends and employee matched earnings that have accrued during the time of marriage.

In order to effectuate the division of those funds Texas requires that a qualified domestic relations order be entered to spell out how the spouses want the money divided. It is important that you hire an experienced divorce attorney to handle this matter. Additionally, there could be tax implications for both spouses when dividing up this type of asset and so you should consult with a tax expert or advisor when deciding what the most tax-efficient method is for receiving those funds.

2.      Pensions


In Texas, defined-benefit pensions are also considered a community asset that are subject to division. However, because pensions are a defined-benefit plan and usually have formulas in place that determine the amount of the benefit you receive based on your age, compensation and years of service to the company, they are a little harder to divide. Further, a spouse usually feels very territorial about their pension and may not want to give it up. However, there are ways of offsetting the value of the asset by offering other assets to equalize the division of property. An experienced divorce attorney can help you protect your pension.


3.      Social security


Texas has no jurisdiction over the division of social security benefits because these benefits are governed by federal regulations. However, it is important to be aware of when a spouse would receive a social security benefit and how much when considering how to divide up the community estate.


If you are married to your spouse for at least 10 years or more, the lower earning spouse may be eligible to collect one-third or even up to one-half of their ex spouse’s social security benefit.

Ultimately, divorce can be financially devastating, especially when a couple has spent decades acquiring wealth. If you are going through divorce in Texas it is important that you hire an experienced divorce attorney to help you protect your assets. Contact us today at Sosa Law at 956-621-1277 to discuss your case.

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