One of the concerns people have in New Jersey regarding divorce is how their 401(k) will be affected during the process. Many fear that their funds are going to be severely diluted to the point where they may not be able to retire properly. Therefore, it is important to understand how to navigate the divorce process and set up protection barriers for your retirement account.
How are retirement accounts divided?
When it comes to the division of assets during a divorce, there are two types of routes you may have to take. One includes having to divide your assets 50/50. This route is only applied by certain community property states such as Texas. However, this is not the case within the state of New Jersey. Your assets will be divided through the court system. It should be noted that 401(k) accounts are considered marital assets that are not subjected to any form of division unless one spouse has more than the other.
Another way to reduce how much you have to reduce your 401(k) account by is to provide your spouse with another form of payment. This may include real estate property or vehicles that equal the amount being asked by your ex-spouse’s attorney.
Protecting your account
In the event that you do have to divide your 401(k) account with your spouse, you will need to ensure that all your paperwork is in proper order. Failure to follow this step properly can lead to having to pay high amounts of taxes on your account. Dividing your account is bad enough; adding taxes on top of that can drastically lower your account’s funds.
Going through a divorce, especially at an older age where your retirement hangs in the balance, is no easy task to complete. You may want to bring in an attorney to help you properly navigate the entire process.
