Without this document, divorce can ruin retirement

On Behalf of | Sep 9, 2022 | Divorce

If you’re getting divorced and getting closer to retirement age at the same time, you may be worried about how the two things are going to interact with one another. After all, gray divorce is the only age group with a rising divorce rate. This is also a group of individuals who are very close to retiring, so the two things are often intertwined.

In some cases, individuals will discover that they’ve been relying on their spouse’s pension plan for far too long. Alternatively, their spouse could have some sort of retirement fund through their work. But no matter how that fund is defined, the person’s spouse was hoping to use that money when they also retired. They may not have been putting money aside on their own, assuming that they would still be supported through the pension or retirement fund.

But getting divorced can cause all that to be called into question. People are often very worried that they’re going to lose access to retirement benefits if they split up. So what can you do about this?

Using a QDRO

There are different ways you can address this, but perhaps the simplest way is to use a qualified domestic relations order (QDRO).

This document operates through the understanding that your spouse was earning that pension plan while the two of you were married. This makes it a marital asset, and you should get a portion of that asset.

However, your spouse hasn’t retired yet and isn’t being paid, so it’s not as if you have cash on hand to divide between the two of you. By using the QDRO, you can set up an agreement for the future by which a percentage of your spouse’s payments will be directed to you.

It is important to note that this may not mean you get quite as much money as you anticipated. You likely only have a right to the percentage of the plan your spouse earned while the two of you were married. If they started working there before you got married or if they continue working there after you get divorced, you may not be entitled to a full 50%.

But you can still get a portion of those payments to help with your retirement. Make sure you know exactly what steps to take when protecting your financial future.