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Protecting Your Retirement During Divorce

Mar 20, 2018

The following article, published in the investment newsletter “The Motley Fool” reminds us that protecting retirement savings during a divorce is important, and third-party mediation or collaborative law may be the best way to protect what was accumulated during your marriage. Remember, you’re better off owning your share of the retirement accounts than having to pay those funds to your lawyer for divorce litigation.

How to Protect Your Retirement Savings During Divorce

When your relationship fades, don't let your savings go with it.

Sarah Szczypinski

(sarahszczypinski)

Sep 2, 2017 at 12:16PM

It's a gut-wrenching experience, and that's before the money issues. Approximately 1.2 million couples file for divorce each year, and the financial side of things can be just as upsetting as ending a relationship -- especially when it comes to retirement. Keep these points in mind as you navigate your way back to single life.

Paying for Dissolution

The average price of a divorce in 2016 was $15,000, but costs vary significantly depending upon the nature of your split -- e.g., amicable or contested -- and the size of your legal fees. You may not have the liquid funds to cover all the related expenses, and it can be tempting to cut your losses by tapping into retirement savings.

This is a no-no. Not only will you pay taxes on 401(k) and IRA withdrawals before ages 55 or 59 1/2, respectively, you'll also incur a 10% penalty if a judge hasn't yet ordered you to divide your assets.



If you can, it's wise to talk to your ex about preserving your collective savings during the divorce process. While you might not be on the best terms, ending your relationship shouldn't mean sacrificing your retirement security.

Dividing Your Assets

Before you can divide your retirement accounts, you must first locate and tally up how much money you have. Do this by collecting summary plan descriptions (SPDs) for employer-sponsored accounts, including 401(k)s and pensions. It's also important to add traditional and Roth IRA balances, money markets, CDs, savings accounts, real estate, and any other financial assets into the equation.


Once you have the numbers in place, you can begin valuing each account for equitable division, which is more complicated than it seems. For example, suppose you have $20,000 in a 401(k) and $20,000 in a Roth IRA. Withdrawals from a 401(k) are taxed as ordinary income, meaning that you'd be left with $14,400 if you fall within the 28% tax bracket. On the other hand, Roth contributions are taxed upfront, which means you wouldn't pay taxes on withdrawals in retirement.



Often, spouses can't agree on how to split the marital assets equally, and it's a good idea to seek third-party mediation or legal advice to ensure that you get your fair share of the savings.

Avoiding Losses

While it's easy enough to split the balance of your checking account, retirement plans aren't so easy to divide. In all cases, making changes to your retirement accounts in divorce requires filing the proper paperwork, and it's imperative to work with an attorney who has experience dealing with marital assets. The No.1 risk of splitting up retirement accounts are taxes and fees, but there are ways to accomplish this without incurring losses.



First, the separation of assets must be clearly spelled out in your divorce decree. Next, you must divide your accounts based on type. For example, qualified plans like 401(k)s and 403(b)s, and pensions are split under a Qualified Domestic Relations Order (QDRO), which allows you to roll your assets into your own qualified plan, tax, and penalty-free. You can also roll 401(k) funds into a traditional or Roth IRA, but this move may not make sense unless you anticipate being in a higher tax bracket later in life, and would therefore benefit more from tax-free IRA withdrawals.


Traditional and Roth IRA assets are divided under the "incident to divorce" rules in the tax code, which means that they can be transferred and split between spouses without taxation within one year of the formal divorce date.

Qualifying for Social Security benefits

Another important thing to consider during your divorce is Social Security benefits, which comes down to timing. If your marriage lasted 10 years or longer, the Social Security Administration (SSA) allows you to claim benefits on your ex-spouse's record, even if they eventually remarry.



You'll need to reach age 62 before qualifying for monthly withdrawals, and you can begin receiving yours even if your ex is still working -- as long as you've been divorced for at least two years. You're also eligible to receive 100% of your ex's benefits in the event of their death, even if they leave a widow or widower behind. Of course, you won't qualify for benefits if you remarry yourself, but those rules change if your subsequent marriage ends, as well (more on that here).


These provisions can make all the difference in retired living, especially if you didn't work during the course of your marriage. The average retired couple currently receives $2,260 in monthly Social Security benefits, and you may receive half that amount, or more, depending on your ex's income. While it may be painful, it's also practical to hold off on divorce if your 10-year anniversary is approaching. The result could sustain you in your golden years.

Starting Fresh

Recovering from divorce takes time and recalibration. After all, you may be losing half of your total savings. That said, it's possible to catch up and establish your financial independence by:


  • Opening a bank account and credit line: If you don't already have an individual bank account, open one that includes checking and savings, and consider applying for a new line of credit, as well. If your marriage was financially messy, the effects may have damaged your credit along the way, and now is the time to rebuild your individual creditworthiness. This can qualify you for lower interest rates, insurance premiums, credit card perks, and other benefits that can help you prioritize long-term savings.
  • Budgeting: Single life comes with new expenses, and you'll probably need to budget for increases in housing, food, utilities, insurance, and other costs. Pay attention to your spending and bills in the months following your split, make cuts where you can, and use your income effectively. This strategy will help you avoid overspending and relying on credit to make ends meet.
  • Investing: Don't let divorce sour you on retirement planning. Instead, take your financial half and work with an advisor to redefine your strategy. You may need to work a few extra years and make catch-up contributions to recover from your split, and it's important to understand these obstacles as soon as possible.



Divorce is all too common and painful, and you shouldn't have to pay for it for the rest of your life. Take advantage of the provisions in place to lessen the financial heartache.

26 Sep, 2023
The family law landscape in Maryland has undergone groundbreaking changes that come into effect on October 1, 2023. Read on to get the full scoop.
15 Oct, 2018
Maryland is a two-party consent state for purposes of recording another person's oral communications. That is, you are not permitted to record someone’s oral communications in Maryland without the other party’s consent. However, there are important exceptions to the two-party consent rule. The first and most clear exception is that you can video record without violating Maryland’s consent laws. As the Court of Special Appeals recently stated, “a video recording without audio recording or without oral communication is not prohibited under the wiretap statute.” Holmes v. State, 236 Md. App. 636, 654, 182 A. 3rd 341 (2018). (There is a separate statute prohibiting surreptitiously recording in someone’s house. Md. Crim. Law Section 3-903 - Camera surveillance.) If you want to be on the safe side and you want to document an event turn on the video but not audio. The question of whether you can record audio is less clear. At a recent divorce trial, I successfully argued that the cell phone videos my client took of his wife yelling and throwing knives at him were admissible. The other side’s divorce attorney argued that because his client did not consent to the recording my client violated the Maryland Wiretap Act, Cts. & Jud. Proc. § 10-401 et seq. (2006), that the recordings were inadmissible and that my client should be criminally prosecuted. He said two other judges had accepted his argument and excluded cell phone recordings from being used as evidence—but the other lawyers did not know about the case I found that contradicted that position. The secret to success in my client’s case was Martin v. State, 218 Md.App. 1, 96 A. 3d.765 (2014), cert. denied 440 Md. 463(2014), cert denied 135 S. Ct. 2068 (2015) in which the Court of Special Appeals held that cell phone recordings are not covered under the state wiretap statute. Recording someone speaking is generally an “interception” for wiretap act purposes. However, the Maryland Wiretap statute only prohibits interceptions if they occur through the use of any “electronic, mechanical, or another device.” CJP §§ 10-401(10) and 10-402(a). According to that case, the Act specifically excludes “telephone” from the definition of an “electronic, mechanical or another device.” Therefore, by using his cell phone to record the incidents, my client was within his rights, the evidence was admitted and he got the divorce he wanted, on the terms he wanted without having to pay any alimony, divide his pension, or pay her attorney’s fees. However, the Holmes case has muddied the water. In Holmes, the mother secretly recorded a conversation she had with her daughter regarding alleged abuse of the daughter by the mother’s boyfriend. The court emphasized the secret nature of the recording several times in its opinion and never mentioned the Martin case. The Court excluded the cell phone recording on the basis that the cell phone recording violated Maryland’s wiretap statute. Practice pointer: It is difficult to reconcile the two cases, from the same court (Court of Special Appeals) but with different judges. Clearly under both opinions, one can videotape using the cell phone. If audio is necessary, the cell phone should be visible so that the other side cannot claim it is a secret recording. (The Court acknowledged that under the full logic of its opinion parents could not record audio of their child’s birthday parties, which may be why they emphasized several times the secret nature of the Holmes’ recording.) Of course, if you can get the other side to consent—make sure it’s on tape, even in “the heat of the moment” --then the audio portion of the cell phone recording is also clearly acceptable. This blog is the opinion of the author and does not constitute legal advice. It should not be relied upon for any purpose; it is presented solely as a discussion point with an attorney of your choosing. It does not in any way create an attorney-client relationship between the author and the reader.
23 Apr, 2018
A common misperception is the couples in Maryland must wait one year of separation to obtain a no-fault divorce. That is not the case. Indeed, Maryland has become one of the most liberal divorce states. In 2015 the Maryland Legislature added a new ground for divorce—“Mutual Consent.” Fam. Law. Art. Sect. 7-103(a)(8).Under that law, as initially enacted,if a husband and wife (1) do not have minor children in common, (2) come to a written alimony and property settlement agreement (including retirement accounts), (3) do not seek to set the settlement agreement aside before the divorce hearing, and (4) both parties appear for the uncontested divorce hearing, then they can get divorced without having to wait for a one-year separation. Indeed, they did not have to be separated at all. That statute worked so well that the Maryland legislature expanded it to divorcing couples with minor children. They also took away the requirement that both parties appear at the divorce hearing (but, as with all divorces, the party requesting the divorce must appear). The current statute provides for divorce based on mutual consent if: the parties execute and submit to the court a written settlement agreement signed by both parties that resolves all issues relating to: alimony; the distribution of property, including the relief provided in §§ 8-205 and 8-208 of this article; and the care, custody, access, and support of minor or dependent children; The parties attach to the settlement agreement a completed child support guidelines worksheet if the settlement agreement provides for the payment of child support; Neither party files a pleading to set aside the settlement agreement prior to the divorce hearing required under the Maryland Rules; and After reviewing the settlement agreement, the court is satisfied that any terms of the agreement relating to minor or dependent children are in the best interests of those children. The impact has been profound. No longer will couples have to worry about who is moving out so that the one-year separation clock starts ticking. Rather they can negotiate a full agreement, oftentimes using mediation or collaborative law, while still residing together. Once the full agreement is in place they can promptly get divorced if all of the conditions are met. Divorces based on one-year separation will be limited to those situations where the parties cannot agree to settlement terms and need a trial. For the 95% of the divorce cases that settle, waiting for a year will be a thing of the past.
04 Apr, 2018
The American Psychological Association has published an article that neatly sums up the benefits to the entire family if the parents can work out a separation agreement without going to trial. https://www.apa.org/helpcenter/healthy-divorce.aspx. It reminds us that divorce mediation can be “a good alternative to court proceedings” and that “research shows that mediation can be beneficial for emotional satisfaction, spousal relationships, and children’s needs.” Those statements also apply to Collaborative Law. Studies time and again show that how the parents get along post-separation and post-divorce are the best predictors of how the children will fare. If the parents can effectively co-parent then the children will usually adjust to the split. If the parents continue to fight then the children will remain (or become) torn which can have lasting, negative impacts on them. The article also mentions the benefits of using psychologists during the divorce process. Social workers are also beneficial. It is difficult but not impossible to find mental health professionals who will accept health insurance. I keep a list of psychologists and social workers that have experience in helping people with marriage and family issues. If you would like some referrals please let me know.
06 Nov, 2017
Maryland Court of Appeals Reverses Itself and Recognizes De Facto Parents
23 Oct, 2017
I am among the first trained attorneys in Collaborative Law and still believe in its usefulness. However, its use peaked a few years ago and now it is used infrequently, and virtually only in divorce cases. Why? First and foremost, Collaborative Law got a bad reputation for being very expensive. In the early days most cases had two lawyers, two therapists, a financial neutral and others. Cases would cost tens of thousands of dollars, not settle and the parties would have to hire new lawyers to litigate the case (the Collaborative Law attorneys could not further represent their collaborative law clients if the case proceeded to court because of the Collaborative Law recusal provisions.) Furthermore, newly minted Collaborative Law attorneys saw every divorce case as a collaborative law case, when in most instances the issues could be settled more quickly and less expensively through mediation. So parties lost faith in recommendations for recommendations to resolve a case through collaborative law. In Maryland, Collaborative Law attorneys have done a lot of work to reform the collaborative law process, to make it quicker, cheaper and simpler. Collaborative Law 2.0. Collaborative law has gone from being over-utilized to under-utilized. While it should still be the exception rather than the rule, It deserves a second look. With that in mind, I commend you to the Maryland Collaborative Practice Council’s information. Its mission is to “support Collaborative Practice Groups, advocate statewide on legislative, executive, and judicial initiatives, and to advance the use of the Collaborative Process as a method of dispute resolution.” They offer the following information on collaborative practice:
25 Sep, 2017
Lorriane C. Ladish Posted in the Huffington Post the Following 10 Tips for Successful Co-Parenting. Although this list is geared towards mothers, I think it is useful for either mothers or fathers:
01 Feb, 2017
A recent article in the Washington Post highlights how courts are trending to awarding fathers more time with their young children, even when the child is an infant. Titled “What’s more important than breast-feeding a baby? Giving a father time with his child” https://wapo.st/2gm0Xkq?tid=ss_mail&utm_term=.64728a23e3c5 the article discusses how a local court rejected a mother’s claim that the father should not have overnight visits because she could not pump enough milk for the father to feed the infant during that time. Despite the mom’s insistence that the child should only be fed breast milk, the Court ruled—by two different women judges-- that the child should also be fed formula so that the infant could spend overnights with the father. Bottom line: at least after the child was six month’s old, the child’s time with the father was more important than the mother’s desire that the child only be fed breast milk.  When I started in family law, the Montgomery County Circuit Court handed out a packet stating that the customary access schedule for fathers was every-other-weekend and maybe a mid-week dinner or overnight—after the child was at least three years old. Overnight visits for newborns to at least three years was unheard of. Even the American Bar Association published a book of access schedules, that did not recommend overnights for infants. In a trial I had about ten years ago, the judge found that both parents were fit parents to have custody, and so he explicitly stated that he was ordering the “usual” custody schedule of every other weekend and weekday overnight to the father. Today, it is unlikely that the judge would rule that way. It is common for courts to award father’s equal custody of the children, or at least close to equal custody of the children. Why? To a large extent, judges are more accepting that fathers are equally qualified to raise children and that the children deserve to have both children equally in their lives. Of course, and I can’t say it enough, studies show that the best predictor for how children will fare after a divorce is how well the parents co-parent. Fighting over a night here or there is not good for the children or the parents. If the children are caught in the middle for years of post-divorce strife then they are less likely to do well. Related to that is that parents who successfully resolve custody issues through mediation or collaborative law have a much greater likelihood of the agreement being followed and the strife lessened.
23 Nov, 2016
I recently had lunch with a friend who commented that he had several friends who wouldn’t talk to each other because of the election results. Some even changed their Thanksgiving plans because they didn’t want to have to share a meal around partisan recriminations. He then told me that he had a friend who was going to work for the Vice-President elect, as if to inquire whether it was OK to keep that person as a friend. I related to my colleague the story of how I met my friend Ed. One day at college one of my roommates came in and said, “Bob, I’d like you to meet Ed. He’s a really nice guy as long as you don’t speak to him about abortion.” Ed and I spent the next five hours, until 3 a.m. debating the issue. We’ve been best friends ever since.  The times between my college experience and this recent lunch are quite different, and not for the better. People have become less willing to listen to other points of view. I grew up in a family where we were taught to seek out other points of view, not to flee from them. My grandfather was as staunch a Republican as you’d ever find. He never voted for Franklin Roosevelt because he thought he as a socialist. Yet each morning he would go to the local newspaper vendor and buy all of the newspapers, including the communist “Daily Worker” paper, so that he could become familiar with opposing points of view. My grandfather’s example is more relevant now than ever before. We should embrace people of different opinions, not shun them. We should be eager to listen to their point of view-but they should be equally willing to listen to ours. When I mediate I give each party “Ground Rules for Mediation” so that we can have productive, respectful, positive meetings. As we gather for Thanksgiving, Christmas and other holiday meals, think about these four Rules, which may make the day more civil and enlightening.
27 Mar, 2016
We are sometimes asked whether Maryland is a community property state. It is not. Only Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are. Maryland is an equitable property state. In equitable property states such as Maryland, property acquired during the marriage belongs to the spouse in whose name the property is titled–but that does not mean he/she gets to keep it in a divorce. In the event of a divorce, the Maryland Court uses a three part test to determine whether to equitably divide the value of the separately titled property. First the Court will determine ownership of the property. Then it will determine if it is marital property, regardless of how titled. Property acquired during the marriage (up until the date of divorce) is marital property unless it is gifted to one party or the parties agree it will be separate property. As the final step, the Court will make whatever monetary award, including in some cases transferring ownership, it deems appropriate. There are 11 separate factors the Court considers in deciding what award, if any, to make. A note about debt: In community property states, debt acquired during the marriage is also community property, so each party is equally liable for all of the debt. In Maryland the Court cannot divide debt except for debt used to acquire tangible property. However, it can take debt into consideration when making a marital award.
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