Retirement planning is a concern for many in Florida, but retirement accounts might be overlooked when divorcing spouses negotiate property division. However, these important assets can have a significant impact on financial stability after divorce and should be an important part of the negotiations. There are different ways spouses can deal with their retirement accounts in a divorce.
Options for retirement accounts
Your options on how to deal with retirement accounts during property division negotiations will depend on the type of account you are negotiating over. If the account is a pension, it will often be possible to have the pension pay benefits to both the employee or retiree and their ex-spouse during the retiree’s lifetime and even afterward. However, with 401(k) accounts, there are several options to consider, including:
- Negotiating to keep the account intact and give the other spouse assets of equal value
- Dividing the 401(k) so that both spouses receive payments
- Rolling over the part of the 401(k) awarded to one spouse into an IRA, if the spouses are over 59 ½ and avoiding tax implications
- Liquidating the 401(k) and then dividing the money left after tax implications and penalties
When deciding what to do with retirement accounts, some options might be more beneficial than others. Before making the decision, it is important to understand all aspects of the account, including its growth potential.
The importance of the QDRO
To divide 401(k) accounts, you must also seek a qualified domestic relations order. While the divorce decree might include information about how to address the retirement accounts, plan administrators require the QDRO before they can complete payments or rollovers to the other spouse.
Dividing retirement accounts can be a complex process. However, it is important to understand the value of these assets and take the time to negotiate a fair settlement that includes these assets.