If you are divorcing later in life, thinking about retirement is natural. After all, you have been planning for your retirement a long time and are probably looking forward to it. If you are younger, retirement may be a topic in a far recess of your mind, but even at this age, your retirement funds must be carefully considered during your divorce. Failing to do so could have long-term consequences, possibly even decades into the future.
If you or your spouse have an individual retirement account, the court will need to determine if it is personal or marital property. Generally, funds added to the account while you were married are considered marital property. If the IRA is to be divided, you will need to transfer or rollover your or your spouse’s portion into a new IRA in their name.
401(k) or Pensions
Many individuals have a 401(k) or pension plan through their work. Like an IRA, the funds put into the 401(k) or pension during the marriage are generally considered marital property and will need to be divided.
In many cases, the money from a plan is not immediately available. Instead, you or your spouse are entitled to funds when the plan start to disburse benefits. To divide a 401(k) or pension plan, many courts need a Qualified Domestic Relations Order (QDRO), which allows for you to benefit in the future.
Qualified Domestic Relations Order
A QDRO tells a plan administrator how to pay non-employee spouses their portion of a 401(k) or pension plan’s benefits. It dictates how the funds need to be separated and paid without incurring a tax penalty. Without a QDRO, you could lose your rights to a portion of your spouse’s retirement account.
In certain circumstances, you are still entitled to a portion of your spouse’s Social Security benefits at retirement age. The requirements are:
- You were married at least 10 years;
- You are 62 or older;
- You are unmarried at the time of collection;
- Your ex-spouse is entitled to Social Security disability or retirement benefits; and
- The benefit you are entitled to is less than the benefit you would receive from your ex-spouse’s work.
Contact a Naperville Divorce Attorney
If you are considering divorce or have already begun the process, our experienced DuPage County family law attorneys can help. We can advise you on the best course of action and attempt to successfully negotiate on your behalf. If a peaceable agreement cannot be reached, our attorneys can aggressively represent you in court will work hard to get you a favorable settlement in your divorce. Call 630-655-7676 to schedule your confidential consultation with us today.