Divorce can complicate everything from raising children to paying the bills. A couple’s retirement funds, in particular, can feel the impact of a split. People who make wise decisions about their retirement payout can retain as much of its value as possible.
The method used to split a couple’s retirement accounts depends on the type of benefits they have and the length of their marriage among other things.
Implementing a QDRO
A Qualified Domestic Relations Order or QDRO is a formal, legal agreement that discloses how a couple will share retirement benefits. According to the Internal Revenue Service, courts often require a QDRO before agreeing to pay a former spouse any amount of their ex’s retirement savings.
A QDRO is convenient in that it clearly discloses how much plan participants should receive and how much any other payees should get. People getting divorced should notify their employer of a QDRO to determine the accuracy of retirement benefits payouts.
Understanding entitlement
Just because one spouse was the primary plan participant for retirement benefits does not mean nothing will go to the other spouse. According to U.S. News, people can find out what portion of retirement benefits is rightfully theirs when they contact their employer. At the very least, employers who monitor company-sponsored plans can provide couples with statements that provide details about the plan including under which conditions it operates.
Once divided, people should protect their remaining retirement savings and immediately roll over their benefits into a personal account. One of the worst mistakes people can make is to spend any money they receive instead of reinvesting it into another retirement plan. The sooner divorcees begin saving after their separation, the more control they can have over their future.
