Can a Wife Get Half of Husband's Retirement During Marriage?
Whether you have a defined benefit pension plan, 401K, IRA, or other retirement savings, you may wonder if your wife can get half of your retirement.
It's a scary thought to give up half of your future assets that you worked hard to save for retirement, but the fact is that you will have to share based on state laws and the conditions surrounding your marriage.
Understanding Retirement Assets
Retirement assets are any funds you saved throughout your working years to support you and your spouse in your golden years. You may have 401Ks, IRAs, or pension benefits to support you when you stop working.
You may have brought these assets to the marriage (earned them before you married) or saved the funds while married. If you and your spouse separate or divorce, the retirement assets become a part of the asset division.
However, if you remain married, there aren't any laws stating how you must divide or use the assets.
Marital Property vs. Separate Property
It's important to understand the difference between separate and marital property. In most cases, separate property is assets you own before the marriage. If you kept the assets separate from your marriage throughout its entirety, it usually remains separate property.
Marital property is more common in marriages and is any assets acquired during the marriage. This may include money, real estate, investments, and businesses.
It doesn't matter whose name is on the assets; if earned or acquired during the marriage, they become part of the marital property.
But wait, there's a catch. Certain types of separate property can become marital property if a spouse brings the asset to the marriage and both partners benefit from it.
For example, if one spouse inherits a house before the marriage, but then both parties live in it, the courts may decide it is marital property because it benefits both spouses throughout the marriage.
Community Property States
Most states are common law states, but nine are community property states. They include:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington Wisconsin
In these states, most marital assets are divided 50/50, but only in the case of divorce. This includes income earned while married, savings, retirement benefits, real estate, personal assets, and debts.
Equitable Distribution States
There may still be a 50/50 divide in equitable distribution states, but the courts can take a more equitable approach if you divorce.
This means if one partner made significantly more money or contributed a lot more to the retirement accounts than their partner, the split may lean more toward the higher contributing spouse. If you remain married, it's between the two of you to decide how to use the funds.
Of course, it also depends on what assets each partner brought to the marriage and how they were held or used. Any separate property may remain separate if not used for the greater good of the marriage, for example.
How Retirement Benefits Are Divided
Regarding retirement benefits, it can be challenging to determine who will get what. You might say, 'Will my spouse get half my pension?' You aren't alone in your worries, but if you remain married, your expenses are her expenses and vice versa.
Here's a quick breakdown of the different types of plans.
Defined Benefit Plans
Defined benefit plans become part of the marital assets. It depends on the length of the marriage and how many years one person worked and earned retirement benefits before the marriage.
But if you remain married, chances are you aren't going to say I worked 40 years, and you only worked ten years, so I get more money.
Because pension benefits have a future value, it can be challenging to determine the dollar amount, but some couples trade other assets, such as the house, in exchange for letting the other partner keep their full pension plan.
Defined Contribution Plans
Defined contribution plans are easier to divide because they have a distinct value at any given point. If you want to split assets, you could always trade a different asset, such as the house, in exchange for keeping the entire amount of defined contributions.
Social Security Benefits
Spouses can file for their Social Security benefits through the Social Security Administration when they reach retirement age. The earlier they claim the benefits, the less they will get; the longer they wait, the more money they'll get each month.
Steps To Take
Thinking about how you'll handle your spouse's pension, 401K, or IRA in marriage can be overwhelming. Here are some steps you can take to ease the stress.
Consult a Legal Professional
Work with a financial professional who can help you understand your retirement assets and what's at stake. It can be time-consuming, but covering all your bases is essential.
For example, if one spouse worked throughout the marriage and the other did not, you may decide there are other ways you want to split the assets.
Gather Documentation
You'll need as much paperwork as possible to cover all your bases. Be sure you have statements for all accounts, including the date and amount of contributions.
Consider Mediation
Discussing how to use retirement assets during marriage can get quite heated, and a professional mediator can help resolve the issues. The goal isn't to hurt anyone; a mediator can help you and your spouse reach a peaceful agreement.
Need Clarity on Retirement Asset Division? Get in Touch!
If you've worked hard as an employee all your life, you may wonder if your wife can get half of your retirement benefits.
The good news is that no one will tell you how to use your retirement benefits in your marriage.
However, if you want to ensure peace and harmony in your marriage or would like to resolve your differences, consider scheduling a consultation with me.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
