Divorce and Retirement Accounts: The "Saver Spouse" Issue

When a couple divorces, the division of assets is often a key issue. Retirement accounts are often a major part of the marital estate and can be a source of contention between spouses. In some cases, one spouse may be designated as the "saver spouse" and the other spouse may be designated as the "spender spouse." The saver spouse is responsible for contributing to the retirement account, while the spender spouse is responsible for withdrawing funds from the account.

In a divorce, the saver spouse may want to keep the retirement account intact, while the spender spouse may want to liquidate the account and divide the proceeds between the two spouses. This can be a difficult decision, particularly if the retirement account is a 401(k) or other employer-sponsored plans.

The saver spouse may be reluctant to liquidate the account because it could result in a significant tax penalty. The spender spouse may be reluctant to keep the account intact because it could limit the amount of money that he or she receives in the divorce settlement.

In some cases, the spouses may be able to reach a compromise that allows the saver spouse to keep the retirement account intact, while the spender spouse receives a cash payment equal to the value of the account. This can be a helpful solution if the saver spouse is nearing retirement and does not want to cash out the account.

If you are considering a divorce and you have a retirement account, it is important to discuss the issue with an attorney who can help you understand your options and negotiate a fair settlement.