Don't Allow Your Divorce To Ruin Your Retirement
For most people, just getting through a divorce can be enough of a challenge without having to worry about retirement at the same time. Divorce, however, presents a time for both financial pitfalls and unexpected opportunities. Divorce and retirement have one big thing in common: money. The arrangements you make about finances could come back to affect you negatively during your retirement years if you aren't careful. Read on to learn more about two divorce and retirement-related money issues.
QDRO (Qualified Domestic Relations Order)
Divorce can present some people with a means to add to or begin a retirement plan, but a lot of people are not aware of this perk. Using a QDRO, divorcing couples are able to make a penalty-free withdrawal from certain types of retirement accounts. If you are a spouse who gave up a career to become a caregiver for your children, this perk is a perfect way to make headway into a retirement account.
Some things to know about a QDRO are:
1. It must be accomplished during the divorce; not afterward.
2. The amount of money withdrawn is up to you and your spouse and no penalties will be charged.
3. The receiving spouse is responsible for paying interest on the disbursement, but this can be avoided by "rolling" the funds into another retirement account.
The Social Security Retirement Benefit
You may think that the number of years you and your spouse have been married is irrelevant, but that is not the case. The 10-year marriage mark is a significant event, at least to the Social Security Administration. If you and your spouse have been wed for at least that amount of time when you divorce, you will be qualified for another retirement perk. This benefit is valuable, so if you are approaching that time you might consider hanging on a bit longer to get it.
Here's what else to know about this benefit:
1. Divorced spouses can be paid as much as one-half of their former spouse's Social Security retirement pay and it doesn't matter if that spouse has remarried.
2. If you remarry you will forfeit this benefit.
3. Taking advantage of the perk will not affect your former spouse's benefit amount in any manner.
4. You cannot get both your spouse's and your own benefit payments, the SSA will only send you the higher of the two payments.
Speak to a divorce attorney at firms like Scott & Scott, PC if you have any questions about either of these divorce retirement crossovers.