Author Topic: Divorce - dividing estate and pretax vs Roth accounts  (Read 392 times)

susanna

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Divorce - dividing estate and pretax vs Roth accounts
« on: September 10, 2018, 12:40:03 PM »
Spouse and I, mid-40s, are getting divorced in the state of Texas. Whether MFJ or single return, we seem to be in the 22% tax bracket for 2018 according to nerdwallet, but of course who knows what will be when we retire in 20 years.

Question: Does taxable 403b money get treated as "less valuable" compared with Roth money when we go to settle this community estate? 60% of our retirement savings is either 403b or traditional IRA (that was a rollover acct) and the other 40% is purely Roth.

Is there any purpose in treating the 403b money differently and trying to discount it now to account for taxes later? Asking for my soon-to-be ex, because the lion's share of this retirement money is his 403b. Thank you.

(Edited for clarity because there is no such thing as a traditional Roth)
« Last Edit: September 10, 2018, 01:18:33 PM by susanna »

terran

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Re: Divorce - dividing estate and pretax vs Roth accounts
« Reply #1 on: September 10, 2018, 01:45:38 PM »
Legally I couldn't tell you, but tax deferred is certainly less valuable than Roth, so I would suggest an even split of both. It shouldn't matter who each account belongs to as there are provisions for splitting such accounts even if you can't normally withdraw from the account while employed. It's called a qualified domestic relations order.

MustacheAndaHalf

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Re: Divorce - dividing estate and pretax vs Roth accounts
« Reply #2 on: September 11, 2018, 07:43:12 AM »
I think you have the right idea - that pre-tax money will incur an unknown drop when taxed, and your best estimate is the current 22% tax bracket.  So in negotiations it would make sense to count that as only 0.78 as valuable as the after-tax Roth money.