The thought of needing to give up retirement savings to pay for your divorce can be terrifying. Neither spouse wants to rebuild their retirement assets after a divorce. And, the process of doing so can be complicated, because qualified retirement plans have certain restrictions. For example, you can lose hundreds of thousands of dollars from your 401(k) during a divorce. But, you can only invest around $19,500 a year. Or $26,000 if you are over 50. Fortunately, there are ways that you can recover retirement savings after a divorce.
What Can I Do to Protect My Retirement Savings During Divorce?
- Get a Qualified Domestic Relations Order (QDRO). Are you concerned that your spouse’s employer will pay out the benefits to your spouse, which could leave you with little to nothing in assets? You should consider getting a QDRO. A QDRO can protect you by ordering your spouse’s pension plan to pay your fair share of plan benefits. Your QDRO will guarantee that your marital settlement agreement does not permit the retirement assets to be separated and spent without penalty. These orders only apply to retirement plans that are IRA tax-qualified and covered by the Employee Retirement Income Security Act (ERISA).
- Consult your attorney or specialist. The divorce court and your retirement plan’s administrator must approve your QDRO before it can be qualified. Your divorce attorney can give you the appropriate forms for your QDRO. Your attorney can also help you draft the specific wording of the order. He or she can read the retirement plan’s summary plan description, as well as other legal documents related to your QDRO, which will help both of you understand the terms of your plan.
- Understand what your payout will look like. If you got married to your spouse with funds already in your retirement plan, those funds are usually handled as separate property during a divorce. If your spouse is covered by a 401(k), for example, the timing of your payment will depend on his or her specific plan. Some plans require an immediate payout, while others allow lump-sum payments later on and periodic payments.
Discuss Your Situation With Our San Jose Divorce Lawyer
It’s crucial that you take the right legal steps to protect your assets and legal rights during a divorce. Do you want more information about what may happen to your retirement savings during your divorce proceedings? Contact San Jose divorce attorney Thomas Nicholas Cvietkovich for a free and confidential consultation.