For many couples, their retirement accounts are some of the biggest assets they have. These are meant to work to support their household as they grow. But, that’s not how things are going to go if they go through a divorce.
Retirement accounts are a primary consideration during a divorce. Some couples have two retirement plans. When these are comparable values, they may each just keep their own account. But, if there’s only one account or there are two, yet they both have considerably different values, they may have to be divided.
What considerations factor into retirement account division?
One of the primary considerations is the value of the account. This doesn’t necessarily mean what it’s worth on the day that you initiate the divorce. The future value has to be considered. You’ll need to weigh what’s likely to happen between now and when you’ll need to tap into the account for support.
Once you know what the valuation is for the account, you can divide it. You’ll need special paperwork from the court to do this so that you aren’t stuck paying fees because make an early withdrawal. Some accounts require a qualified domestic relations order (QDRO), which must be approved by both the judge and the plan administrator. A transfer incident might also need to occur, so you don’t have to pay taxes.
People who are divorcing should learn more about the handling of their retirement assets in their divorce. Understanding the valuation method used and finding out what you’ll walk away with might help you to plan for the end of your marriage. Working with a professional who’s familiar with high-asset divorces is beneficial in these cases.