For years you have saved up for retirement and hope to have a sizeable amount for when you take your leave later in life. Yet now, you are facing an on-coming divorce. What should you do? Well first things first, make sure you understand the rules and legal rights under your 401K plan. In case of a change in 401K in divorce, be aware that your spouse and your dependents can claim some or part of the retirement money. Consult your plan administrator about options and monitor changes to your plan. Make sure you do some detailed research about the plan and its guidelines to ensure that the money is protected for future financial stability.
Often 401K plans are split in half during divorce settlements with your spouse receiving half of the retirement savings unless an agreement for other provisions is made. Other options include rolling over the portion of your 401K plan given to your spouse into an IRA or individual retirement account. If both you and your spouse have 401K plans often the spouse with the smaller account can claim part of the larger account. Sometimes both ex-spouses agree to take only their share which limits legal drama and court fees. Either way, it is best to talk with your spouse before marriage about future financial planning to ensure that you both are on the same page when it comes to assets.
To ensure that there is less stress during a divorce consider asking your plan administrator for copies of your QDRO or Qualified Domestic Relations Order. Make sure your QDRO is valid and verified by ensuring it has all the right information and that it was correctly created in the first place. This also prevents other from illegally accessing your 401K benefits. Make sure both sets of lawyers have copies of all paperwork so there can really be no disputing settlements.
All in all, the QDRO is an important aspect of settling a divorce dispute in a 401K plan. By making sure all you’re your paperwork is organized and you understand your legal rights, you keep your 401K in divorce protected and ensure that you are entitled to some or all of the benefits you also worked hard for.
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