How much of a retirement account is at risk during divorce?  

Adults contemplating divorce in New York often worry about the financial risks. The equitable distribution property laws in New York require people to divide income and assets obtained throughout the marriage with their spouse in a fair manner.

People have to divide home equity and savings accounts. If they have set funds aside for retirement, they may need to divide those assets as well. How much could someone potentially lose from their retirement savings during a New York divorce?

Every property division settlement is unique

There is no set formula for establishing how much of someone’s retirement savings are at risk in a New York divorce. Any deposits made during the marriage are part of the marital estate and potentially subject to division. Deposits made before the marriage may be separate property.

A careful review of financial records is often necessary to determine what is separate and what is marital property. From there, the spouses need to negotiate or litigate to divide all of the marital property.

If the courts require the division of the account, people may worry about taxes and penalties. Those who make early withdrawals from 401(k)s and similar accounts usually need to pay a 10% penalty. However, those who divide their accounts using a qualified domestic relations order (QDRO) can avoid those penalties.

Some people can prevent the division of the retirement account at all by acknowledging the marital share of the account but then negotiating for terms that involve concessions elsewhere so they can keep the entire account themselves. Setting specific priorities, like maintaining retirement savings, can help people more effectively navigate New York divorce proceedings.