If you are getting divorced in Indiana, there are many things to think about, and your retirement accounts should be one of them. How will your divorce affect your 401(k) or IRA, and what happens to those accounts when you retire?
Dividing retirement accounts in Indiana
One important thing to keep in mind is that retirement accounts are considered marital property in Indiana. This means that the amount accumulated from the time you got married to the official date of divorce will be subject to division. The court will look at several factors when determining how to divide these assets, including:
- The length of time each party held the account
- The amount of funds contributed to the account by each party during the marriage
- Contributions made outside of marriage, e.g., before or after
- The age of each party at the time of divorce
If you are getting divorced and have a 401(k) or IRA, three things could happen. These include the following:
- The account could be divided fairly between the spouses.
- One spouse could retain an account and give the other spouse a cash settlement equal to their share of that account.
- One spouse could take one account while the other takes another asset.
In most cases, the account will be divided fairly between the spouses because Indiana is an equitable distribution state. However, if one spouse keeps the retirement accounts and the other spouse is getting a cash payout, the court will divide accounts in proportion to their value. For example, if the wife has a $50,000 401(k) and the husband has a $20,000 IRA, then she would get 60% of the retirement assets, and he would get 40%.
Any portion of your retirement account that you earned before your marriage and after the separation date will be yours. To retain more of your funds, take measures to protect it like having a prenup in place or using tax-efficient mechanisms to divide your accounts.
No matter what stage of life you are in, it is vital to have a solid retirement plan. If you are getting divorced, make sure to take these accounts into consideration when planning for your future because retirement accounts are valuable in old age.