Secure Your Future: Divorce And Retirement Planning

Just like many things in life, divorce often gets hung up on a few, very contentious issues. If it's not the children, it's money. Who gets what property and who has to pay what debt can really bog a divorce procedure down, but there is another financial facet of divorce that often gets overlooked. It could be the last thing on your mind, but one day you will be retiring and depending on a fixed income. While it's never too soon to begin retirement planning, a divorce should have you on red alert to protect and secure your future retirement earnings. Read on to learn more about retirement planning and divorce.

Social Security for the Divorced

Most everyone knows that if they have worked over their lifetime, they can expect to get a Social Security check every month, once they reach retirement age. What a lot of divorced people may not know, however, is that you are also entitled to take one half of your spouse's retirement income, once you reach retirement age. The Social Security Administration (SSA) requires that you be married at least 10 years to partake of this perk, and it is meant to help the spouse who may not have earned as much money as their partner did during their working years. If you have not been married quite 10 years, it would be well worth it to hang on a bit longer, to take advantage of this retirement benefit.

Another consideration is marriage. If you remarry, you are no longer able to get your ex's funds. Your ex, however, can be married without it affecting your own ability to get the funds. You must understand that you cannot receive both your own retirement plus half of your spouse's retirement; you will be receiving whatever is the higher amount of the two. If your spouse makes more money than you do, the SSA will automatically provide you with that income.

QDRO (Qualified Domestic Relations Order)

Another sometimes overlooked retirement benefit might be lurking in your spouse's retirement account right now. If you wait until your divorce is final, you could miss out on what you are entitled to receive as a result of a QDRO, qualified domestic relations order. This order, signed by a judge during your divorce process, allows one spouse to remove funds from the other spouse's 401(k) plan. Where normally doing so could incur penalties, using this method allows a free distribution. Any money deposited during the marriage is fair game, as long as both parties agree on the amount. You can avoid having to pay taxes on those funds by rolling them over into your qualified retirement account before tax time.

For more information on divorce and retirement proceedings, contact a local family law firm.