I came across a good article today that outlines how different retirement benefits could be divided in the event of a divorce.

Here is a brief rundown of some of the topics discussed:

  • What to do before you divorce – Get a copy of the summary plan description from the employer
  • How to split up 401(k) and IRA balances – We recommend you do a percentage split rather than a straight dollar split, because of fluctuations in the market
  • What if you started saving for retirement before you married?  A common question – whatever was saved pre-marriage is the separate property of the spouse that saved the money.
  • What about the pension plan?  Will need to get an estimate of benefits from the employer.  Each spouse will get a share of the future benefits, or one spouse can buy out the other spouse.
  • What is the deal with social security – You must be married for at least 10 years to get a share of your spouses’ social security.  This won’t affect the amount of their benefit.  The rules are complicated – check with social security or talk to a lawyer.  It is a smart idea to slow down the divorce if you are close to the 10 year anniversary.

This article really shows just how complicated the issues can be in a divorce.  What seems like a very simple task (divide up assets and debts) can quickly become very complex when you consider future benefits, stock options, health care, market fluctuations, social security, taxes, etc.  Make sure you do your homework early on, and be prepared before you go to see a lawyer.