When your marriage ends, you understand that this process will have a significant impact on your future. You will face adjustments in virtually every area of your life, including your finances. Your immediate financial interests and your future stability are at stake, and it is in your interests to take steps to seek the best possible financial settlement you can. As you seek meaningful and reasonable terms, you might wonder how your divorce could impact your retirement benefits.
Your retirement savings represent years of hard work and dedication. Your hopes and dreams for your golden years depend on these savings, yet your divorce could lead to a significant reduction of these benefits. It will benefit you to have an understanding of how to fight for your future interests and how the process works of dividing IRAs and other types of long-term savings accounts.
The division of marital property
Divorce requires the division of marital property, which is anything accumulated, bought, earned or saved over the course of a marriage. The exact way you will have to divide your marital assets depends on specific factors, such as New Jersey property division laws or the agreement you and your spouse reached out of court. However, there are also special rules that dictate how you can remove or transfer funds from certain types of accounts, such as an IRA. For IRAs, there is a transfer transaction that will move a portion of funds to the receiving spouse.
For certain types of retirement plans, a QDRO is necessary to divide these funds. This is a Qualified Domestic Relations Order, and it is necessary to transfer funds from a qualified plan. Without a QDRO, money transferred from a qualified plan is subject to penalties and taxes. Splitting a financial account is a complex process, and it may be beneficial to work with a professional when considering your options.
Fair distribution of your assets
Your future is on the line during your divorce. The decisions you make today have the potential to impact you well into the future. As you consider your options, you may find it helpful to understand all of the potential factors that could impact the division of your retirement benefits and your post-divorce financial future. Before you agree to the terms of a property division settlement or make any other critical choices, knowing the benefits and potential drawbacks is crucial.