Divorce can bring about numerous changes and challenges but few people recognize the need to plan for their future. You must look at divorce as not just a relationship issue but a financial one. The decisions you make during the creation of your divorce agreement will continue to affect you in many ways for years to come. It's vital that you not miss the opportunity to secure your future needs and that includes your retirement. Read on to learn more about making sure that your divorce provides you with a better retirement plan.
Social Security and Divorce
The issue of Social Security may be the last thing on your mind during a divorce, but you should think very carefully about how your marriage and divorce might affect your benefits. As you know, as you reach the age of retirement you will be contacted by the Social Security Administration (SSA). You will be informed of your choices as to when you can retire and how much you might expect to receive in the form of benefits. You might be surprised to learn that you are entitled to be paid one-half of your former spouse's benefit when you reach retirement age.
It works like this: If you have worked enough during your lifetime, you may be entitled to retirement benefits of your own. If your retirement benefit is less than one-half of your ex-spouse's benefit, you will automatically be paid the higher amount. For those that earned less than their spouse, this ex-spousal retirement benefit could prove to be invaluable. The catch is that you must have been married to this ex-spouse for at least 10 years to qualify for this perk. If you are considering a divorce and have not yet been married for 10 years, it might be in your best interest to put off divorce for the time being so that you can take advantage of this benefit. Speak to your divorce attorney about creating a separation agreement that will allow you to live separately and make provisions for child custody, property, debts, and other divorce issues during the separation period.
QDRO (Qualified Domestic Relations Order) and Divorce
Most people know that workplace pensions are almost a thing of the past. Now, you must take the initiative and create your own 401(k) plan or other retirement plan for later on. As a divorcing spouse, you must also take advantage of that retirement fund to help yourself. If you have fewer earnings than your spouse, you might be entitled to remove funds from your spouse's retirement account in order to set up your own retirement account. In most cases, fees and penalties make removing funds from a retirement account costly. However, during a divorce, a qualified domestic relations order (QDRO) allows spouses to access those funds without paying a penalty. This QDRO is a separate act from your divorce and must be accomplished during the divorce process.
Speak to a divorce attorney, such as at Kelm & Reuter, P.A., about creating a separation agreement and about the QDRO as soon as possible.
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