For most people going through divorce in their 20s, 30s or 40s, retirement is far from the first thing on their minds. Instead, a fair financial settlement is likely to be the larger priority. But if you do not give serious thought to retirement now, you could wind up in serious financial trouble in your 60s and 70s.
There is an alternative. A court order known as a Qualified Domestic Relations Order or QDRO allows a divorced spouse to share a portion of the proceeds from an employer-sponsored retirement plan. In other words, if only one ex-spouse invested in a company retirement plan, both exes can share in the funds once it’s time to retire.
Why isn’t your divorce decree enough?
For many couples the retirement savings are one of the most valuable assets they own. The spouse who has a retirement plan through work may agree to split it up, likely in exchange for other valuables. But if a retirement plan is in the name of one of the spouses and is through his or her employer, the law makes it more difficult to divide up in a divorce.
Opening up retirement possibilities
This is where the QDRO comes in. The parties to a divorce can negotiate to share in retirement money but a family court judge must issue a QDRO for that part of the settlement to take effect. Otherwise, federal law forbids the division of a retirement plan.
Many employment-based retirement plans are made up of stock market investments, so there is not a lump sum of cash to split up. Instead, in many cases, the non-employee former spouse waits until the employee former spouse retires. Then each spouse receives a monthly payout. Keep in mind that every retirement account must have a corresponding QDRO – a single order cannot cover every plan or account.
Used properly, QDROs can help you continue to prepare for retirement. Getting divorced does not have to delay or limit your retirement dreams.
Have more questions about QDROs? Fortunately, our legal team at Suisman Shapiro Attorneys-At-Law is here to explain how a QDRO can help you settle your divorce more quickly – not to mention help ensure you will enjoy a comfortable retirement.