Retirement accounts are typically one of the major assets married couples have. These accounts are considered marital property if they were acquired during the marriage.
Couples who divorce as they are nearing retirement need to consider the long-term worth of each asset; trading away retirement assets in order to keep the house may be a sentimental choice but could end up being a foolish financial decision.
Splitting a 401(k) or other qualified retirement plan requires the preparation of a QDRO (qualified domestic relations order). This order allows for the division of qualified plan assets in a tax-deferred manner for the receiving spouse, and provides that spouse with 60 days in which to roll it over into an IRA without penalty.
While Social Security benefits are not subject to division in a divorce, there are some rules that will affect post-divorce income. For example, you cannot collect benefits on your ex-spouse’s record after a divorce unless the marriage lasted more than 10 years and you are over age 62. If your ex-spouse dies, you may be eligible for survivor benefits (100% of your ex’s benefits) provided the marriage lasted 10 years, you are at least 60, and you are not already entitled to benefits equal to or greater than your ex-spouse’s benefits.
You can get your retirement as a single person on the right track if you follow these tips:
- Get guidance from your divorce attorney on how retirement assets are typically divided;
- Be sure you get what is rightfully yours under the law
- Hire a financial expert to help you value your marital retirement assets as you will need to know whether it is better to get a lump-sum payout or receive your share over time;
- Don’t automatically give up retirement assets in order to keep your house. Ask your financial consultant for guidance on the best choice.
- Be aware of all the tax implications of your financial decisions during your divorce, both now and for the long-term.
- Know whether you qualify for a Social Security spousal benefit (you must have been married for at least 10 years) and if that benefit will be greater than your own.
Determining whether to end a marriage is not an easy decision, nor one to be taken lightly. Your legal team at Koenig|Dunne is here to provide you with guidance and advice regarding this difficult decision and all of the decisions that you will face throughout the divorce process.