Under Indiana’s family laws, a divorce court judge may reasonably divide all of the property you acquired during your marriage between you and your spouse. If you contributed to a retirement plan, a divorce may require a payout either as a lump sum or in installments to your soon-to-be ex-spouse.
The type of retirement account you have may determine its division. As noted by Kiplinger’s Personal Finance magazine, your plan may require you to obtain a Qualified Domestic Relations Order to include with your divorce.
What are some options for dividing a retirement account?
An IRA started after a marriage generally becomes marital property. Even if your spouse did not work or fund it, the court takes into consideration that its contributions came from income that supported your shared household. As a divorcing couple, you may negotiate a fair division of an IRA without interference from its custodian.
Depending on the equity in your 401(k) plan, you may liquidate a portion of it to provide your ex-spouse with his or her share of assets. Because all marital assets must divide fairly, you may “trade” your ex-spouse’s portion of a 401(k) with another property. If you wish to take full ownership of a shared property, you may need to buy it from your spouse or negotiate a trade.
How may I continue contributing to my retirement after a divorce?
Unless you decide to retire, you may continue working and contributing to your retirement plan after a divorce. If you and your spouse intend to divide a 401(k) account through a lump sum payout, you may consider rolling it over into an IRA. This may reduce your tax liability and provide you with a greater degree of control in managing your account as a single individual.