Taking Care Of Retirement While Getting Divorced

You might not automatically connect divorce with retirement planning, but divorce presents people with at least two unusual opportunities. After all, if you know you are bound for a divorce, then it only makes sense to get all you can as a result. Divorce can represent a diminishing of financial resources for some, but if you know about these two retirement issues, you can emerge from it with a nice nest egg. Read on to learn more.

Your fair share of marital assets

When you divorce, you and your spouse will be dividing up the assets of the marriage. That might mean a division of the funds in a savings account, the home, the cars and almost anything else you both own jointly. One asset some divorcing couples fail to consider is the retirement fund. No matter who actually owns the retirement fund, it is considered marital property and is open to distribution. You might already know that you can borrow funds from certain kinds of retirement accounts for special purposes like a home down-payment, but in most cases, you will face fines and penalties for touching those funds meant for your retirement years.

To ensure that spouses are not penalized financially for dividing up the retirement fund, such as a 401(k), a special type of court order can be used. The qualified domestic relations order (QDRO) can only be used during the divorce process. The order must be signed by a judge, so a timely start on the process is advised. This method of using retirement funds to fulfill a division of marital assets means no penalties for the early disbursement. The amount can be any amount up to 100% of the funds and interest will only be owed by the receiving party if they fail to "roll" the funds over into their own retirement account before tax day.

Your fair share of retirement income

Your full retirement age represents a time when you can expect to receive Social Security payments. The amount you get is based on the amount of money you've earned, and you might be somewhat disappointed at the low amount if you've spent many years raising your children or working at low-paying jobs. Fortunately, the Social Security Administration (SSA) recognizes the contribution and needs of spouses like that and has instituted measures to help. Once you reach full retirement age, you are eligible to be paid one-half of your spouse's Social Security retirement pay. There are a few caveats:

1. You must have been married for a minimum of ten years before your divorce.

2. You cannot be remarried.

3. If your Social Security retirement amount exceeds that of your former spouse, you will automatically receive the higher of the two.

4. Your former spouse's retirement benefit won't be affected by this disbursement, and they probably won't even know about it (unless you tell them).

Speak to your local divorce attorney services and find out more about a QDRO.