When dividing retirement benefits in a Pennsylvania divorce, it may be important to consider the comparative earnings of each spouse, their stage of life and their opportunities for future retirement acquisitions. Saving for retirement is a top priority for most people by the time they reach their 40s, if not earlier, yet some find themselves short when they have to think about dividing marital retirement accounts. Some married couples have relied on one spouse to save for retirement while the other paid current expenses or stayed at home to maintain the home and raise children. Others haven’t saved enough because their income was just enough to meet expenses. In these situations, a divorce lawyer must pay close attention to the strategy and law for dividing retirement accounts in a Pennsylvania divorce.

How are retirement benefits treated in a Pennsylvania divorce?

For many families, a 401(k) or an individual retirement account is one of the most valuable assets in the marital estate. Retirement benefits acquired during the marriage are likely to be divided by equitable distribution in a divorce case, or if the benefits are in pay status, they might be considered as income for paying child support, spousal support, alimony pendente lite or alimony. Depending on the circumstances, the court may allow a spouse to keep his or her retirement benefits while giving other marital assets to the other spouse (“immediate offset”), divide the retirement account between the spouses, or in the case of a pension annuity, order the benefit to be divided each month as it is received (“deferred distribution”). Sometimes a nonemployee spouse may receive a cash distribution from a 401(k) plan (but not an IRA) that is exempt from the 10% early retirement tax penalty. Still, distributions from a 401(k) or IRA account are generally subject to federal income tax. Retirement accounts (other than Roth IRAs) contain pre-tax dollars that may be viewed as less valuable than bank accounts or other assets of the same dollar amount. Pollock Begg Komar Glasser & Verz LLC lawyers are trained to consider the income tax consequences of retirement benefits when resolving equitable distribution cases.

When dividing retirement benefits in a divorce, it is important to analyze the retirement plan documents, contributions, and investment experience to determine the marital component. After considering the value of the benefits, the appropriate division of retirement benefits can be determined and, if necessary, court ordered. These divisions may require a qualified domestic relations order or other forms to carry out the settlement or court decree. The lawyers at Pollock Begg are knowledgeable in analyzing retirement plans and will take the necessary steps to secure the benefits necessary for a client’s future.

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