Planning for retirement during a marriage usually means sharing the costs and household work with someone while simultaneously pooling your resources. The same couple that would have a very comfortable retirement together could struggle to maintain their households independently after a divorce.
Concern about the financial consequences of divorce can sometimes leave people feeling trapped in unhealthy and unhappy marriages. Will you have to split your retirement account with your ex if you do get divorced?
Sharing retirement account is common in Pennsylvania divorces
If you and your spouse executed a prenuptial agreement before you got married or if you set terms in a postnuptial agreement, you may have already set rules in place regarding how you will handle your retirement asset in the event of a divorce. If you don’t have an agreement with your spouse, that means you will have to think about how Pennsylvania state law requires that the courts handle your property.
Like many other states, Pennsylvania requires the equitable distribution of marital assets when a couple divorces. Income you earn while married and assets you purchase or otherwise acquire are marital property in most cases. Inheritances are among the limited exceptions to this rule. Items you owned before marriage are usually separate property, although commingling your assets with marital resources might give your spouse to claim to them.
When it comes to retirement accounts, it is typical for at least the portion of the balance accrued during the marriage to get split in the divorce. Whatever you deposited before you got married or after you separated from your spouse will typically remain separate property that you won’t have to divide.
Will you have to pay an early withdrawal penalty?
If you aren’t already at the age of retirement, pulling funds out of certain kinds of retirement accounts could have tax implications and even penalties. Thankfully, divorce is one of the situations in which you can take money from a retirement account without incurring those penalties. Using a Qualified Domestic Relations Order (QDRO), you can effectively split a retirement account into two separate accounts without meeting to pay penalties or taxes when you divide the account.
The better you understand the Pennsylvania rules about your property, the easier it will be to make beneficial decisions about your assets and any possible settlement in a pending Pennsylvania divorce.