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Protecting retirement savings in a divorce

Divorcing couples in Texas should be concerned about how a separation could affect their retirement savings. The money placed in an IRA, pension plan or 401(k) is generally considered a shared asset that could be subject to division in a divorce.

When deciding what to do about these assets, it is important to keep their limitations in mind. For example, if a person makes a withdrawal from an IRA before the age of 59 1/2, there is a penalty. For some retirement accounts, including 401(k)s and qualified pension plans, a document called a qualified domestic relations order must be prepared. Rather than deal with some of the complications involved in dividing a retirement plan, some couples simply prefer to have one partner keep the retirement plan while the other takes other assets.

While Social Security benefits are not a negotiable part of the divorce agreement, soon-to-be exes should know about the potential for drawing on a spouse's earnings after retirement. This will be possible for couples who are married for 10 years or longer. A retiree can choose between drawing on individual benefits or getting 50 percent of the spouse's benefits, whichever are higher. The other spouse will still receive 100 percent of their Social Security benefits as well.

In a high-asset divorce, the process of property division can be complex. This may be further complicated in Texas, which is a community property state and marital property is supposed to be divided equally. In practice, this does not necessarily mean that each person gets 50 percent of every asset. A couple may still make an agreement that involves one partner keeping some assets and the other keeping different assets. An attorney could help a divorcing spouse come up with a fair arrangement.

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