Retirement Savings Split for Married Couples

[Deleted]

If the roles were reversed, I would absolutely tell you to do even retirement and fight for more retirement in your name. This will help IF you do get divorced down the road and won't be fighting over retirement funds since it will be even.

Although, with a court order, I believe you forgo the tax penalties on withdrawal in the case of divorce. Again, it could be argued that a certain spouse made more and should be entitled to more retirement. It's really not a black and white answer.

[dr.girlfriend]

What's the reason for the discrepancy? I know you have similar incomes now, but did you not before?  Did he start late, or contribute less income before you married? If the imbalance existed pre-marriage, I would keep contributing equally until you each max out. Maybe when you get old enough to do catch-up additional contributions you can catch him up.

[wildrice]

Personally, I plan to split retirement contributions 50/50, or at least relatively. Our incomes are similar (I make about 5k more) and we are each currently doing 10% of our income. If our incomes were less similar I'd probably try to do more of a dollar amount split.

I have a ton more in my retirement account than he does, because he's getting a very late start after a long PhD program. Most of it was from before we married (we've been married 2.5 years). At first I thought we'd focus on catching him up, but then I realized that could screw me in the event of a divorce if I stop saving in my own name in favor of saving in his. There are probably a lot of factors (and math) that could end in dividing things not according to name, anyway, but I just assume it's simpler and less likely to screw me to do it the way we're doing, especially if we ended up with a shorter marriage.

FWIW I have no intention of divorce, and neither does he, but since we can't predict the future I'd rather split any married contributions roughly equally.

[sadlebred]

Keep some of it in your name only. Like PP said, it will come in handy if you ever get divorced. I would have been screwed otherwise. Most of mine was pre-marriage, but I lost 10 years of saving for retirement (loooong story).

[imojoebunny]

This is state specific. In my state, generally, all marital assets are divided equally. If you had a significant imbalance in assets when you married, that is worth documenting. Dh and I had the same "net worth" when we married, so if we get divorced, I would expect to get half of all our assets, including retirement, which, seems to be the way things are going for the people I know who are/have gone through it. Our parents have different asset profiles, and we will keep those inheritances separate, when they pass, even if the use of the assets benefits us both. We are older, so this time is closer than we would like it to be.

[ohgillian]

I'm in charge of the finances and I try to get us pretty equal, mainly as a protection for either of us down the road in case we have marital problems. Of course I don't expect us to, but if he were managing the money I'd expect him to be doing the same for me.

[jlt19]

I would assume no because if you're filing joint, you're taxed on the total income.

I can see a benefit to putting all the money in one account because of compound interest, but I wouldn't take that risk.

Unless you are 100% in charge of the money now and where it goes. Then put it all in yours 😉

[smsm24]

I have more in my retirement than my H, but thats from past jobs and not saving in his 20s and early 30s. We try to save evenly now. His current job puts 14.5% into his account for him. I get 2% match, so I put in 12.5% so we are both saving a similar %. When one of us gets a raise that person increases by 1%.

I don’t want to stop saving in my name because he didn’t save before we met. When we start to withdraw it will be used jointly the way our salary is now. I feel like it protects me just in case and doesn’t hurt him.

[oswin]

Sept 27, 2019 12:28:29 GMT -5 jlt19 said:

I would assume no because if you're filing joint, you're taxed on the total income.

I can see a benefit to putting all the money in one account because of compound interest, but I wouldn't take that risk.

Unless you are 100% in charge of the money now and where it goes. Then put it all in yours 😉

That's not how compound interest works. It doesn't matter if how many accounts the money is split into, assuming the same return on all accounts it'll be the same total interest in 1 account vs 5, etc.

In any case, I'd make your contributions equally at this point.

[dr.girlfriend]

Sept 27, 2019 10:32:08 GMT -5 Cappy said:

Sept 26, 2019 18:50:06 GMT -5 dr.girlfriend said:

What's the reason for the discrepancy? I know you have similar incomes now, but did you not before?  Did he start late, or contribute less income before you married? If the imbalance existed pre-marriage, I would keep contributing equally until you each max out. Maybe when you get old enough to do catch-up additional contributions you can catch him up.

He worked abroad teaching English in Japan, was a bartender, and did random hourly jobs until around age 30. During that time I was working traditional salaried jobs with retirement contributions. He only got access to an (abysmal) employer retirement plan 3 years ago (age 39) and he never started an IRA or saved a penny before this. I have 17 years of service in higher education with 12% of my gross salary contributed by my employer with zero contribution required on my behalf.  This is where the discrepancy came from. I've barely contributed my own after tax dollars to retirement but had a very generous employer situation.


We live in Indiana which is not a community property state. 

Under these circumstances, I would fund equally going forward but not try to make up for this discrepancy unless you've maxed out your own retirement.  

[RockNVoll]

Sept 27, 2019 10:56:02 GMT -5 Cappy said:

I guess I have an understanding of what the courts will do if there is a divorce but my real question is one of IRS/tax rules. Is there any issue on the distribution end with an inequity or benefit to being able to pull from equal pots in retirement. Will it impact us if one of us has a higher "income" in retirement via distributions but still file joint?

I'm definitely not an expert and my brain is a little fried at the moment but the only benefit to unequal pools that I can think of is if you want to keep the money invested as long as possible before being required to take RMDs, in which case you'd weight in favor of the younger spouse. But tax laws are complicated and ever changing so trying to plan for what might apply in 25-35 years is probably a fool's errand.

[jlt19]

Sept 27, 2019 15:07:44 GMT -5 oswin said:

Sept 27, 2019 12:28:29 GMT -5 jlt19 said:

I would assume no because if you're filing joint, you're taxed on the total income.

I can see a benefit to putting all the money in one account because of compound interest, but I wouldn't take that risk.

Unless you are 100% in charge of the money now and where it goes. Then put it all in yours 😉

That's not how compound interest works. It doesn't matter if how many accounts the money is split into, assuming the same return on all accounts it'll be the same total interest in 1 account vs 5, etc.

In any case, I'd make your contributions equally at this point.

Yeah, after I typed that I didn't think it was right. Good thing we have money managers at work to make these decisions for us!

[sillygoosegirl]

If you want to make use of anything like a first time home buyer withdrawal, having ample amounts in accounts in both your names doubles the money you have access to.

Having more money in the older spouse's name means getting access to the money sooner.

Having more money in the younger spouse's name means you can keep the money in the account longer before being hit by minimum required withdrawals (not sure if that's actually helpful unless you are rich or keep working past age 70).

Having fewer accounts (all IRAs in one name) sometimes means you can muster enough to qualify for lower fees. (Potentially this could be bad in the event of divorce, and certainly it's better to save more than the cap for one person, but you can get much of this benefit by having one spouse invest in one set of funds and the other in another, with a well-balanced portfolio between you. This is what DH and I did when we didn't have much invested yet.)

[Shreddingbetty]

In my divorce i did get a good portion of his IRA and 401k. I think we subtracted whatever was in both our retirement pre marriage and then subtracted all my remaining retirement from his total amount and then I got half of whatever was left if that makes sense. We also had other assets that needed to be split so our total assets were basically 50/50. I don’t honestly remember if they normally split retirement first and then figure out the other assets, it’s been a year and it is all kind of a blur. If you are heavily funded I might make it a priority to fund his IRA for a while.