How Divorce Could Impact Your Retirement Plans
While ending an unhappy marriage can be good for both your physical and emotional health, it can wreak havoc with your finances. In addition to the immediate adjustment of living on one income, there are potential impacts on your future financial security as well. The following details how getting a divorce can affect your retirement plans and tips on ways that you can protect yourself.
Divorce and Retirement Benefits
If your plans for retirement were tied to your spouse, it is important to be aware of how these benefits are dealt with in a divorce. Under the Florida Statutes, any property and assets earned, acquired, or otherwise accumulated over the course of your marriage would be subject to the rules of equitable division in a divorce. This applies to homes, cars, household furnishings, and money in bank accounts, as well any pension benefits earned by either party and funds in IRAs, 401ks, or other retirement plans.
These and other marital property, assets, and debts must be listed when filing a divorce petition. During your divorce proceedings, negotiations will be held between you, your spouse, and both of your attorneys in an effort to reach a settlement that is fair. If you are unable to reach an agreement, the judge will decide on how to divide assets. Factors they will consider include:
- The length of the marriage;
- Each person’s income and earning potential;
- The amount of non-marital assets they possess;
- Their contributions to the marriage and whether one spouse gave up their own career or education to support the other.
Dividing Retirement Benefits In A Divorce
There are several options for dividing retirement benefits in a divorce. One is to exchange rights to pensions or funds in other retirement accounts for other types of marital property, such as money in joint accounts or ownership interest in the family home. Another option is to accept a larger amount of spousal support in exchange for surrendering rights to retirement accounts.
If you opt to receive a share of your spouse’s retirement benefits, there are some steps you need to take to protect yourself:
- Consider the tax ramifications: Under Internal Revenue Service (IRS) guidelines, deductions from retirement accounts could result in heavy tax debts;
- Get a Qualified Domestic Relations Order (QDRO): This is issued by the judge in your divorce case and is required by retirement plan administrators before any payouts can be made.
- Consider rolling over retirement funds: Transferring any retirement funds you may be entitled to immediately into another account can help to avoid penalties.
- Consider other benefits you may be entitled to: Depending on your spouse’s age and the length of your marriage, you may be entitled to a portion of their Social Security retirement benefits.
Let Us Help You Today
When getting a divorce, you want to take steps to ensure your current and future financial security is protected. Fort Lauderdale divorce attorney Vanessa L. Prieto provides the trusted legal guidance you need in these matters. To request a consultation, call or contact our office online today.