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Are Retirement Accounts Divided During Divorces?

D'Angelo & Grabow, LLP March 6, 2019

Wisconsin residents who wish to retire in the future may dedicate portions of every paycheck that they earn to their retirement funds. While these funds may start small, over time and with proper investing they can grow into large sums that can support individuals well into the later years of their life. One event that may quash the growth of a well-funded retirement account is divorce. This post will generally address what may happen to such a fund when a marriage comes to its end.

Since the money that individuals earn during their marriages is generally considered marital property, the earnings that go into their retirement accounts are also considered marital assets. Even if only one of the partners works and contributes to the retirement plan, the contributions of the other spouse, like caring for children or supporting the other spouse while he or she received an education, can entitle that non-working spouse to a significant portion of the retirement account.

This may mean that a person’s large retirement fund could be significantly cut down if it must be shared with their ex-spouse. It may also mean that they do not have the same financial stability that they were expecting they would have when they planned to remain married indefinitely to their spouse.

Because retirement funds may be divided during a divorce it is important that later-in-life divorcees fully understand the financial ramifications of their property settlements and spousal support obligations. A retirement plan intended for a couple may fall short of two individuals’ needs if they choose to live their later years on their own after going through a grey divorce.