Jar labeled "Retirement" full of coins

Your Rights to Retirement Assets 

Abrahamson Law Office  March 1, 2024

When planning for retirement, it is crucial to understand your rights to retirement assets. This includes knowing your vested interests in retirement plans like 401(k)s and pensions, as well as understanding how assets are handled during events such as a job change or divorce. It's also important to be familiar with the rules for when and how you can access these funds, and the potential tax implications of doing so. Educating yourself on these topics can help ensure that you are making the most of your retirement assets and avoiding unnecessary penalties or losses. 

At Abrahamson Law Office, we understand that discussing retirement assets can feel overwhelming. It's essential to know that you have rights that protect your future and ensure that the fruits of your hard work are appropriately allocated. We're here to help you understand what those rights are and how they safeguard your best interests. 

Division of Property in Nebraska  

In Nebraska, the law views marriage as a partnership where both parties contribute equally. Therefore, in the event of a divorce, marital assets, including retirement assets, are divided equitably among the two parties. However, it's important to note that equitable does not always mean equal. Several factors are considered, such as each party's contribution to the marriage, the duration of the marriage, and the economic circumstances of each spouse.  

How Retirement Assets Factor In  

Divorce can significantly impact your retirement assets. The division of these assets must be handled carefully to protect your future. At Abrahamson Law Office, we're committed to helping you navigate this challenging time with compassion and expertise. Retirement assets are a significant consideration during the equitable division of property in Nebraska divorce proceedings. Here is a simplified breakdown of how these assets are assessed and divided: 

Classification of Assets 

Retirement assets are classified as either separate or marital property, with those accumulated during the marriage generally considered marital property and thus potentially divisible. 

Valuation of Assets 

To prepare for division, it's necessary to determine the value of the retirement assets. This may involve: 

  • Estimating the present value of pensions. 

  • Reviewing account statements to assess the balances of 401(k)s or IRAs. 

Distribution Method 

After valuation, assets can be allocated through a Qualified Domestic Relations Order (QDRO). This order outlines: 

  • How the retirement assets will be distributed between the spouses. 

  • The avoidance of early withdrawal penalties. 

  • The management and assignment of any tax liabilities upon distribution. 

By thoroughly understanding each of these steps, individuals can strive for a fair and equitable division of retirement savings, ensuring that the outcome of their hard-earned investments is handled with care and consideration. 

Types of Retirement Assets  

There are various types of retirement assets that one can accumulate throughout their career. It's imperative to understand the characteristics of each to plan effectively for retirement. Here's an overview of the most common types: 

  • 401(k) Plans: Employer-sponsored retirement plans that allow employees to save a portion of their paycheck before taxes are taken out. Investments grow tax-deferred until withdrawn in retirement. 

  • IRA (Individual Retirement Account): A personal retirement savings plan with tax advantages for individuals to save independent of employer-provided plans. Different types include Traditional IRA, Roth IRA, SIMPLE IRA, and SEP IRA, each with unique tax implications and eligibility requirements. 

  • Pensions: Employer-funded retirement plans that provide a fixed payout at retirement based on salary history and length of employment. These are becoming less common in the private sector. 

  • 403(b) Plans: Similar to 401(k) plans, but for employees of tax-exempt organizations, such as schools and non-profit organizations. 

  • 457 Plans: Deferred compensation retirement plans available to state and municipal employees, as well as employees of some tax-exempt organizations. 

  • TSP (Thrift Savings Plan): A federal government-sponsored retirement savings and investment plan that offers the same type of savings and tax benefits as a 401(k) plan. 

  • Annuities: Contracts purchased from an insurance company that can provide a steady stream of income at retirement for a specified period or for life. 

  • Real Estate Investments: Property ownership that may generate rental income or appreciate in value over time can be part of retirement planning, though not typically in tax-advantaged retirement accounts. 

  • Stocks, Bonds, and Mutual Funds: Investment assets held within retirement accounts or taxable accounts that will contribute to wealth accumulation for retirement. 

Each of these assets can play a vital role in building a comprehensive retirement strategy and needs to be understood fully to optimize retirement planning. 

Qualified Domestic Relations Order (QDRO)  

A Qualified Domestic Relations Order (QDRO) is a legal tool used during a divorce that splits and changes ownership of a retirement plan to give the divorced spouse their rightful portion of the assets. In essence, it acts like a set of instructions for the retirement plan administrator on how to pay out benefits to both parties. This method ensures that the division of retirement benefits is carried out fairly and in accordance with divorce agreements, without triggering penalties or unexpected taxes. It's a crucial step for protecting the retirement benefits you’re entitled to receive after separating from your spouse. 

What Happens if You Change Jobs?  

When you change jobs, it is important to make informed decisions about your existing retirement assets. Options typically include rolling over your 401(k) to your new employer's plan, transferring the funds to an Individual Retirement Account (IRA), or leaving the funds in your former employer's plan, if permitted.  

Each choice comes with its own set of considerations regarding plan fees, investment options, and tax implications. For pensions, you may be entitled to the benefits accrued, yet the specifics depend on whether you are vested in the plan. It is critical to review the summary plan description and consult with a financial advisor or attorney to ensure that you are maximizing your retirement savings and understanding your rights during such transitions. 

When Can You Access Your Retirement Assets? 

Accessing your retirement assets typically happens upon retirement. However, there are certain circumstances, such as financial hardship or a divorce, where you might need to access these funds earlier. It's important to understand the potential penalties and tax implications before making such a decision. Rest assured, we're here to help you make the best choices for your future. 

At Abrahamson Law Office, we believe in providing empathetic and personal guidance to our clients throughout Omaha, Nebraska, and surrounding counties. Protecting your rights to your retirement assets is our top priority. Let us guide you through this process with compassion and dedication.