Roth IRA in Oregon Divorce Mediation:
Mediator Matthew M. House, J.D.
A Roth Individual Retirement Account (Roth IRA) is a retirement account not offered as a benefit of one's employment. Unlike a traditional IRA, it is funded with after-tax dollars. As long as you wait until normal retirement age (59 1/2) to withdraw the funds, the growth in a Roth IRA can be withdrawn tax-free. (Note: The contributions to a Roth IRA can be withdrawn at any time, without penalty.)
Please note that this page addresses only Roth IRAs. Traditional IRAs have their own page.
The information below should not be applied to Traditional IRAs.
If you have a Roth IRA, here is the short version of what you need to know about how the mediation process will address it:
Matthew may recommend a particular disposition of the Roth IRA, based on your circumstances. However, the way you choose to handle the ownership or transfer of your Roth IRA is entirely up to you, assuming that both parties agree. Like all other decisions in mediation, the final decision is yours.
Please note that this page addresses only Roth IRAs. Traditional IRAs have their own page.
The information below should not be applied to Traditional IRAs.
If you have a Roth IRA, here is the short version of what you need to know about how the mediation process will address it:
- Transferability: The IRA funds can be transferred to an IRA in the name of the other spouse. As long as it is transferred into another IRA, there is no taxation associated with the transfer.
- Documentation Needed: Usually, the most recent 3-12 months of statements and transaction history.
- Valuation: Unless you intend to withdraw cash from a Roth IRA before age 59 1/2 or want to plan for the likelihood of doing so, the real value of a Roth IRA is the same as the statement balance. If you follow the rules of withdrawal, there is no taxation applied to the growth of the funds. A divorce-related transfer to another IRA is not considered a withdrawal and, therefore, is not a taxable event.
- Process: Transferring Roth IRA funds to the other spouse is not difficult. Assuming the other spouse already has a Roth IRA, it is just a matter of a form or two, which you can complete on your own. If the receiving spouse does not yet have a Roth IRA, she or he will need to open one.
- Implementation Time: The processing time to transfer or divide a Roth IRA can vary, but it is usually relatively brief.
Matthew may recommend a particular disposition of the Roth IRA, based on your circumstances. However, the way you choose to handle the ownership or transfer of your Roth IRA is entirely up to you, assuming that both parties agree. Like all other decisions in mediation, the final decision is yours.