Overcome by worry, you wonder how you will survive financially after your pending divorce. This is not the scenario you expected after your marriage more than two decades ago. You stayed home, took care of the kids and eventually picked up some part-time work, while your spouse provided the main financial support for the family.
In this scenario, when reviewing marital assets, do not overlook your spouse’s retirement investments accumulated during the marriage. This represents the time that your legal team turns to a qualified domestic relations order (QDRO) for help. This legal document issued by the court helps you secure certain assets – retirement assets — that belong to you during the property division segment of divorce.
An effective tool for property division
A QDRO allows you to gain your share of retirement assets in plans such as 401(k)s, 403(b)s along with those found in profit-sharing and pension plans. This tool often is relied upon in divorces involving longtime married couples and ensures the proper division of assets from within any retirement plan – as long as certain assets are marital assets.
An experienced attorney can help with the creation of a QDRO, but you also should contact the retirement plan’s administrator for guidance. An effective QDRO outlines the details related to payment determination and any interest earned from that total amount.
Here is an example. Let us say that your spouse has $350,000 in his 401(k) and all of that was accumulated during your marriage. You are entitled to half of that, according to the QDRO determination. However, in many cases, QDRO findings occur a few months before the divorce is final. If it takes another seven months to complete the divorce, you will receive interest on that $350,000 from the time of the determination until the completed divorce.
In many cases, many people take the money and roll it over into an IRA. However, sometimes, people need that money right away as a financial lifeline. A key factor to know is that you can withdraw money from a retirement plan under a QDRO without experiencing an early withdrawal penalty fee of 10%.
Your marriage lasted a long time, but ended. Together, you built up as many assets as you could with many of them through your spouse’s retirement portfolio. Determine your portion with the help of a QDRO.