You’re getting closer to retirement, but one thing has made itself apparent to you: You cannot stay married to your spouse. They don’t want to spend time with you, and when they do, neither of you have anything in common anymore.
This is normal, as some people start to grow apart over time. If you don’t see yourself staying in this marriage, then it’s time to look into your options for divorce. You’ll be going through a gray divorce, and as such, one of the most important things to look at is how this decision will impact your retirement.
Dividing your 401(k)
In Texas, the state goes by community property rules. This means that any money set aside into a 401(k) retirement account during your marriage should be shared equally by you and your spouse. In a divorce, you have to first determine how much of that money was earned during your marriage. Then, you can base the division of that asset on the shared earnings.
There is no requirement for the court (or you) to decide to split this retirement evenly. You may decide that you and your spouse should go your separate ways with your own retirement accounts, for example, or you might ask for a larger portion if you helped contribute to the plan and will need more financial support in the future.
You may need a Qualified Domestic Relations Order
You may need a Qualified Domestic Relations Order to divide your retirement plan. This is helpful for spouses in particular, because you should be able to roll that money into your own account without tax or other penalties.
Other kinds of retirement accounts also exist and have their own requirements for division. Usually, divorce is considered to be a major life event and will help you avoid taxation or early withdrawal-related penalties. However, you should go over the specific legal requirements and issues before you decide how to divide the asset. It may be more worthwhile to exchange assets, such as by taking the family home rather than the retirement account. There are several ways to divide assets, so look closely at your situation and the implications of your possible choices before you decide.