Retirement and Divorce
Planning for retirement is hard enough. Throwing a divorce into the mix makes retirement planning even more difficult. There are two main elements to retirement planning that must be addressed as part of your divorce:
- Splitting retirement assets already accumulated in the divorce settlement process
- Your ability to save for retirement after your divorce is final
Below are some questions to think about:
- What assets do you already have? This includes not just 401(k) or 403(b) plans, but also Deferred Compensation accounts, pensions, annuities, etc.
- Are the limitations that the pension plan has on splitting assets? Many government plans and military pension plans do not allow pension assets to be split until certain milestones are reached, such as the number of years of service. Other plans do not allow pension benefit splitting under any circumstances.
- Are there limitations from the investments you have selected? Some annuity-based investments do not allow you to remove assets from the plan or split assets with an ex-spouse. Remember, a QDRO (Qualified Domestic Relief Order) only tells the retirement plan provider how you have agreed to split the assets. It can’t compel the plan do take actions not allowed as part of the plan structure.
- How will your retirement plan continue to accrue benefits. Some plans accrue earnings based on existing balances, so taking money out of the account dramatically reduces earnings going forward. Accumulation of future pension benefits.
- Do you have access to a retirement account to save for retirement? IRA limits are very low, so you may need more of the assets you have already saved at the expense of different support payments to offset the property settlement.
- Will you have the cash flow and ability to contribute to retirement to the account post-divorce? If you don’t have a job today, your ability to contribute to a retirement account may be limited.
- How do you want to manage the assets post-divorce? Do you want to manage the assets yourself, roll them into your existing retirement plan at work or keep the assets with your ex-spouses employer?
These are just a small sample of the issues involved in dealing with retirement as part of your divorce. Consult an experienced Certified Divorce Financial Analyst to better understand your personal situation.
Jeff Kostis, President
Certified and experienced, Jeff shares his insight to help educate each client.
- CERTIFIED DIVORCE FINANCIAL ANALYST™, 2011
- CERTIFIED FINANCIAL PLANNER™, 2008
- CPA/PFS, 2008; CPA, 1995
- Master’s degree in Accounting, University of Texas, 1993
- Graduate of Bradley University, 1991