The end of a marriage signals significant financial change, and one of the most important financial concerns involves the appropriate and fair division of retirement savings. If you are getting divorced and plan to retire in the near future, protecting your financial interests is critical.
Divorce requires the distribution of marital assets and debts, significantly impacting your capabilities and options during your impending retirement. Fortunately, it is possible to hold on to your dreams for your golden years and reach a divorce settlement that is practical and allows for a degree of continuity of lifestyle.
The QDRO and the division of retirement assets
Retirement assets are some of the most valuable assets accumulated over the course of a marriage, especially if the marriage extends over a few decades. Divorce later in life is often quite complex due to the significant complication of distributing of valuable long-term savings. In order to draft retirement plans and pensions, a couple must draft a Qualified Domestic Relations Order (QDRO).
QDROs are the only way that a retirement plan will pay any amount to the non-earning spouse--meaning, without a proper QDRO, one spouse will not receive his or her portion of retirement payments. Depending on the type of retirement account, the QDRO must be pursuant to the Employee Retirement Income Security Act. These orders should always be prepared and drafted with the help of an experienced attorney.
The factors that impact your financial future
You may wish to avoid litigation during your divorce, but in making this decision, you must be willing to work through potentially contentious issues, such as property division. In negotiations and discussions about the distribution of marital debt and property, and the preparation of a QDRO, you would be wise to consider how the decisions you make impact the following aspects of your retirement:
- Your ability to continue with the same lifestyle
- Your intended date of retirement
- The potential need to work part time after retirement
- The tax burden of retaining ownership of certain real estate
- Child support payments
- Spousal support payments
When it comes to retirement assets and your divorce, the decisions that you make and the agreements you reach will impact your life for decades to come. While it is likely that you will have to make some financial adjustments, you can still enjoy a strong post-divorce future and stable retirement.