Someone in San Antonio who is getting divorced in their 30s or 40s has a lot of things on their mind. Their retirement is probably not first on the list. Most likely, worrying about things like child custody, who gets to keep the house and other more immediate concerns are taking up more brain cells these days.
But a sound divorce strategy involves long-term as well as short-term planning. And whether you planned on retiring in five years or 30, the terms of your divorce can affect your plans for your golden years.
Splitting up retirement savings in Texas
Fortunately, if you and your ex saved for retirement during your marriage, you should expect to get half of those retirement accounts. Under Texas law, contributions to retirement accounts made during the marriage generally are community property, meaning the two of you split them 50-50. But contributions made before the marriage are separate property. Whoever made the contributions gets to keep those. This rule applies to retirement assets like:
- 401(k)s, IRAs and other retirement accounts
- Deferred compensation accounts
As with most property division-related matters, you and your spouse can negotiate something different than an exact 50-50 division of the shared retirement money. For example, one spouse might agree to take less in exchange for keeping the family home or receiving spousal support until they can support themselves.
Dividing up retirement accounts takes an extra step called a Qualified Domestic Relations Order, or QDRO. The judge overseeing your divorce will issue QDROs to your employers as necessary to direct them to pay a portion of a retirement account or pension to the employee’s former spouse.
Your divorce settlement impacts your retirement plans
Retirement is expensive. Even if it’s still far off for you, having your share of the savings now gives you a good base to start preparing from. And if you are in your 50s or 60s, it is critical that you be financially ready to enjoy your retirement years after your divorce is final.