Divorce and Your 401k

Do you ever talk to your spouse about what would happen if you got divorced?

We talk about it.

Is that weird? I feel like its weird.

But, we still talk about it.

We talk about who would get what stuff (he doesn’t want any of the furniture, btw) and who would keep the house or if we would sell it. Basically, if we ever decided to get divorced we could probably do it with like 30 minutes of pointing and an excel spreadsheet.

But cars and dressers and book collections are physical things that are pretty easy to split up. What happens to all your money if you split?

Specifically, what happens to your retirement accounts?

Have you ever thought about that? Of course you haven’t. No one wants to plan for divorce. But I’m super Type-A you guys, so… there’s that. 

I’ve talked about why you should have money conversations with your spouse before. Communication is a big thing. And I’ve talked about retirement accounts before. Multiple times. But I don’t think I’ve talked about why we plan for the future and what that means for spouses and marriages in general.

Sometimes with the idea of financial independence looming, one spouse can be way more into it than the other. My husband humors my craziness a little bit. But while he teases me about my spreadsheets, I do think he appreciates that I am planning for our retirement.

And that’s the key right there. OUR RETIREMENT.

I don’t want to be financially independent and talk retirement if he’s not there to enjoy it with me (although he says he’s going to work forever). Ultimately, I control the spreadsheets but we’re both on board with saving for retirement and upping our net worths.

However, if at some point we decide not to continue our marriage then what happens to all that money we’ve socked away? Do we just split it equally? What if one spouse makes more than the other spouse? What if there are not equal amounts in our separate retirement accounts?

I know there are ways that 401ks and retirement accounts can be divvied up after a divorce, but in the spirit of us being a unit, I try to fund equal amounts to our varying retirement accounts.

We both have 401ks. We both have Roth IRAs. But my employer match is higher than my husbands and that gets funneled into a 403b. So, if I know that my 401k will be higher than his just by virtue of a better match I might decide to max out his Roth before I max out mine.

Does that make sense?

I’m a HUGE component that spouses should share all income equally. I, personally, don’t understand spouses who have seperate banking for everything. It doesn’t make sense to me.

I know couples who do the separate banking thing and it works for them, but for me, it’s just so foreign. Since I consider my husband and I to be team, I want us to share all things equally. And that means retirement funds should be divvied up equally.

How do you handle retirement accounts between you and your spouse? Do you fully fund one persons and let the other persons lag? Do you try to go for equal amounts in each persons? I want to hear all about it! Tell me why it works for you!

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2 Responses

  1. Mr. Bundt says:

    Hello Basic Bitch!

    Great questions! I think a lot of us have those thoughts.

    It is definitely savvy to max out each one of your retirement vehicles. Don’t forget your HSAs too, if you can afford to pay your medical costs today out of pocket your Health Savings Accounts will earn compound interest and create a nice nest egg for retirement medical expenses.

    I recently sold my 4 bed 3 bath house to buy a 3 bed 3 bath townhouse that is not only bigger than my house was but also cost $100k less – and my motivation for doing so was to put more money away for my wife’s and my retirement.

    If you are like me and married for love, you may have forgotten to talk about a pre nuptial agreement. I had been under the impression that if you didn’t sign a pre-nup, that was that. Turns out I was wrong, a friend recently told me about post nuptial agreements, they have the same legal power as a pre-nup, the only difference is you sign them after the wedding date.

    My wife is the romantic and I am the planner in our relationship, and I think it will hurt her to even suggest we could ever get divorced, or that simply having a “nup” will jinx us.

    My plan is to explain to her that I just get anxious about the unknown, to be generous and fair in the terms of the nup (Alimony, child custody, child support), and to have my Will and Life Insurance updated at the same time with her as the beneficiary so she can see that I harbor no secret intention of getting divorced and this isn’t some trick to swindle her out of a fair divide should the unthinkable ever happen.

    I also plan to follow up the nup talk with some romantic plans like a hotel stay as a treat for her putting up with all my planning.

    • Basic Bitch says:

      Wow! This is great! Seems like you have a really great plan of attack. The post-nup is a great idea if you think its necessary and I hope you are able to explain it to her in a way that makes her see that it’s a smart idea for both of you!

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