Your spouse may not have retired yet, but you know that they’re earning a pension or some other type of employer-sponsored retirement fund. Since the two of you got married, it has been your plan to use these benefits so that you can both retire. Your spouse knows this and has also been planning on it.
But now things are changing because you and your spouse are going to get divorced. Can the value of these retirement savings still be divided during? Or will you lose your retirement options because of your divorce?
Benefits can be split along with other assets
Yes, retirement benefits can be divided in a divorce. In many cases, retirement benefits do count as marital property. This means that, when a couple gets divorced, those benefits are subject to division. There are different ways retirement benefits can be divided, and one of the most common is to use a QDRO, or a Qualified Domestic Relations Order.
A QDRO is a legal order that sets someone else up as an alternate payee – a former spouse, in this case – and says that they have a right to get a percentage of the retirement benefits from a qualified retirement plan. This plan may be a pension, as noted above, or a 401(k). The QDRO will outline the specifics of the division and must be approved by the court and the plan administrator.
For example, perhaps the two of you were married for 15 years. Your spouse will put in another 15 years before they retire, so you were married for half of that employment. Half of the pension plan would then potentially need to be divided between the two of you (as half of it was earned during your marriage), giving you 25% of the total with each monthly payment, once a payment schedule goes into effect.
Don’t let any assets go unaddressed
Many people have lost out on a portion of a retirement fund because it wasn’t being paid out when they got divorced and they did not know how to use a QDRO to divide future payments. You don’t want to let assets go unaddressed like this, so it pays to know what options you have available to you. Seeking legal guidance proactively can help.