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Teacher Retirement Savings and Divorce

Teachers have one of the most important jobs in Texas, and the job comes with a lot of stress. Unfortunately, getting divorced will only add to that stress. The choices you make in your divorce can play a big role in whether you retire when you want or suffer increased financial pressure in your golden years. Some people end up working for far longer than anticipated due to the financial “hit” they took in divorce.

At Tad Nelson & Associates, we have helped represented teachers in the divorce process. In many ways, your divorce will be no different than what a plumber, lawyer, or accountant goes through. But there are some unique issues that apply to teachers, especially related to retirement. Our Galveston and League City divorce lawyer provides an overview in this article.

Your Retirement Benefits as a Teacher: Community Property?

Texas workers save for retirement in many ways. Most pay into the Social Security system with each paycheck, and some also have a 401(k), pension, or Individual Retirement Account. The general rule is that Social Security earnings are not divided in a Texas divorce, but a 401(k) or pension could be.

For Social Security, your ex might apply for benefits based on your work history if you were married long enough. But he or she doesn’t walk away with a bag of money, the way they might when dividing a 401(k).

There’s a wrinkle for teachers, however.  Many teachers are put into the Teacher Retirement System (TRS), instead of paying into Social Security. Will a Texas judge divide your TRS retirement account in a divorce?

It’s possible. These benefits are not exempted the way Social Security savings are. What matters is when you paid into the TRS system and whether they are community or separate property.

If you contributed while married, then a presumption applies that these benefits are community property subject to division on divorce. Conversely, you might have begun working as a teacher before marriage, in which case those pre-marital contributions are not subject to division.

What Retirement Benefits Do You Have?

There’s an additional wrinkle: each district decides whether to enroll their teachers in Social Security or the Teacher Retirement System. That’s added complexity for your divorce. You might actually be enrolled in Social Security and not know it. Similarly, you might have paid some years into Social Security and other years into the TRS system if you jumped around from district to district during your career.

Some teachers also save on the side with an individual retirement account. Those retirement savings could be divided in divorce, also. It depends on when you made contributions. If married: then the contribution is probably community property. Before marriage: the contribution is not community property.

This is one reason to talk with an attorney early in the divorce planning stage: figuring out what “community property” you have that might be divided in divorce. Some people with many jobs have multiple retirement accounts.

Protecting Your Retirement as a Teacher

The Teacher Retirement System is notorious for being stingy. Some teachers work for decades only to receive a small percentage of their pre-retirement income. You need an attorney committed to ensuring your financial well-being after divorce.

There are strategies to keep your TRS account or IRA in one piece. For example, your spouse might have their own retirement account of equal size. In that happy situation, each of you can leave with your own retirement accounts. There is no reason to divide anything.

Another strategy is to give your spouse an off-setting share of community property. Imagine your husband has no retirement savings but you do. Your savings equal $120,000. You could let him leave with $120,000 in other property, maybe a combination of cash, jewelry, and cars. That makes things even.

As a teacher, your spouse might have been the higher earner, and you were expecting that additional income to help you in retirement. We can also discuss whether to seek alimony, or you might try to get a portion of their retirement account.

Call Our Divorce Lawyer with Questions

Divorce often has dramatic effects on the ability of our clients to retire as planned. Some people see their carefully laid retirement goals thrown out the window because they are getting divorced. Our law firm understands how important it is to secure your finances. You worked hard—you should enjoy the benefits of that work in retirement.

Call Tad Nelson & Associates today to review how Texas divorce law will impact your retirement.