What Happens To Retirement Savings [ 401(k), IRA, or Pension] in a Divorce?

When a marriage dissolves, the complicated process of dividing assets can often make for difficult discussions. When contemplating divorce, it is important to know how assets will be divided and the impact such divisions may have. Some of the assets that are divided include your 401(k), IRA, and pension.  In the state of New York,  when a divorce is taken to the courts, the method of asset division is known as “equitable distribution.” This method means that property between divorcing spouses will be divided in a way the judge overseeing your case believes is fair, but not necessarily equal.

Instead of leaving it up to the courts, spouses have the right to make agreements about how they would like such assets divided if they are willing to negotiate with one another. Having an experienced matrimonial attorney is crucial when negotiating a divorce settlement agreement and can help avoid disputes or problems down the line. Even if the soon-to-be ex-spouses can reach an agreement, there will  still be the need for a court order, which is known as a Qualified Domestic Relations Order. This should be prepared by your attorney.

If an agreement cannot be reached, the legal system will handle the distribution of assets, including retirement assets. In New York, courts generally use what is known as the Majauskas formula to calculate the split. Under this formula, an ex-spouse is provided with one-half of the part of their spouse’s pension earned during the marriage. If a spouse accrued 20 years of service during the marriage and retires with a total of 40 years of service, the ex-spouse will be given 25% of the pension.

The Majauskas formula is not the only way to equitably divide retirement savings assets.  Courts may also divide assets by awarding one spouse a flat dollar amount, or awarding one spouse share calculated as of a specific date.  Courts may also factor in the amount of money each spouse earns and the contributory roles each party played during their marriage.

In what can be a very difficult time, our experienced matrimonial attorneys can guide you through this complicated process and work to ensure any division of your retirement assets is not unfair to you.