As far as equitable distribution – the legal process where your assets and liabilities are divided during divorce – is concerned, division of the retirement accounts is pretty easy. But, because retirement accounts represent a large portion of what most people have saved throughout their lives, they are also very emotionally complicated.
The higher earning spouse might feel (and often does, in fact) that he is entitled to keep all or most of the proceeds in these accounts because they resulted directly from his employment. I don’t say “he,” because I believe this is a strictly male phenomenon, because it isn’t, but because – statistically, at least – men are often the higher wage earners. As often as sixty percent of the time, men earn the same or more than their partners. The wage gap is even greater if the parties have had children.
Regardless, though, this is not how the law in Virginia works. Anything earned, purchased, or acquired during the marriage, regardless of title, is marital property. Anything that results from your efforts or labor or brainpower, no matter whose name is on the account, is divisible in divorce.
What isn’t divisible – what constitutes separate property – is whatever was earned, purchased, or acquired before marriage or after separation, or anything that came to one party from a third party, like a trust fund or an inheritance.
Retirement, though, that was earned during the marriage is marital and, therefore, divisible. Any retirement that was earned, whether from the same employer or a different one, either before marriage or after separation is separate property, but what was earned during the marriage is marital.
So, it’s not really relevant that he earned it through his labor – or, if the shoe is on the other foot, that you earned it solely through yours.
It doesn’t matter who was the saver and who was the spender.
What matters is when the money was earned.
If it’s a marital asset, you’ll receive your marital share. Because we are an equitable distribution state, it is theoretically possible that the judge could order a division other than 50/50, but it is generally unlikely. For the most part, retirement accounts – and any other assets – will be divided 50/50.
This includes all forms of retirement accounts, whether we’re talking pensions (like the military pension or the civil service FERS pension), 401(k) accounts, 403(b) accounts, IRAs, Thrift Savings Plans, and so on. Even other employee benefits, like stock option plans, are divided in a divorce. (Heck, we can even divide airline miles – so you bet we can divide any kind of retirement account that you’ve got.)
Savings and investment vehicles, even ones that aren’t necessarily retirement, are also divided. Again, we’re just looking at when (during the marriage) and how (through the efforts of the parties, rather than a third party) the money was earned and saved. Money that you have in high yield savings accounts or investment accounts will also be divided. Any stocks and bonds or EFTs that you’ve purchased are divided in divorce as well. These are often easier to divide, too, because they’re more liquid and don’t have specific tax based consequences. (But for tax advice, you should definitely talk to a CPA or tax attorney.)
While a tax deferred account, like a 401(k) or a 403(b) will need a specific document, like a QDRO, to divide the account without incurring tax penalties, and even something like an IRA will require a specific court order to effectuate the division, other investment accounts are often much easier to divide. Not only that, these can be much easier to access – if, say, you need quick access to money to hire an attorney, for a security deposit or last month’s rent at a new place, or even a down payment on a new house. Divorce is a time of uncertainty, so access to the money that you’ve saved is critically important!
The only thing that differs at all is social security. I don’t actually view social security as retirement in the same way, though I understand that, for many people, social security is the only retirement they have. Since social security isn’t an account owned by the parties – its owned and managed by the federal government, it isn’t divided in divorce. Whether you’ll receive a portion of his social security (or you’ll have yours) depends on federal law, rather than state law.
We don’t touch social security at all. In fact, in our separation agreements, all we do is mention it – basically, that nothing in the agreement will be construed in any way to take away any entitlement that someone might have to either their social security or their former spouse’s social security.
To double check your social security entitlements, you’ll want to reach out to social security directly.
Retirement is one of the easier parts of the larger divorce process, even though it can be pretty emotionally fraught. For more information, to request a consultation with one of our licensed and experienced Virginia divorce attorneys, give our office a call at 757-425-5200.
