You may be wondering how your retirement nest egg will be affected during your divorce settlement. Some mistakenly believe these funds are completely off-limits from the other spouse. However, generally that’s not the case. Any money in an IRA, 401K or pension is fair game in a divorce settlement.
Retirement funds are one of the most complex divorce issues to sort out. There are many moving parts to consider when splitting retirement. Such factors will determine how much a spouse will receive from your retirement plan. Certain issues must be determined while working out how to split these assets, including:
- Does the other spouse have retirement savings?
- What type of retirement fund is it– IRA, 401K or pension?
- What is the current age of the spouse?
- Was the retirement fund started before the marriage began?
- How many more years will the spouse with the retirement fund continue to work?
What is a Qualified Domestic Relations Order?
A qualified domestic relations order, or QDRO (pronounced “quadro”), is a legal order by a judge that determines how assets will be split. A QDRO is used for alimony, child support and other divorce issues, not just retirement. A spouse must have a separate qualified domestic relations order for each separate retirement account.
“A qualified domestic relations order, or QDRO (pronounced “quadro”), is a legal order by a judge that determines how assets will be split. “
For a 401K account, your legal representation may need to consult the plan administrator before drawing up a QDRO on your behalf. If your QDRO does not comply with the plan regulations it could extend the length of time it takes to settle your divorce. However, an IRA does not require a QDRO. In some cases a QDRO can prevent taxes from being levied on withdrawn 401K funds, but there are many factors that must be considered before determining if this is possible. If 401K money is withdrawn before the other spouse is 59.5 years old, there are generally penalties unless the money is rolled into another 401k account.
“Retirement funds are one of the most complex divorce issues to sort out.“
Splitting retirement during divorce should be handled under the guidance of an experienced attorney. Don’t risk losing your entire retirement savings! Get a lawyer on your side who will advocate for your interests by contacting Family Law Richard E. Young & Associates today.