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Secure retirement benefits with a QDRO

If you have been following our blog, you are familiar with the phrase "gray divorce," a descriptor referring to those seeking to end their marriage as their retirement approaches. In contrast with the decline in divorce for couples under 50, there has been an increase in filings for those nearing the end of their careers. While couples separating at this age typically do not have to grapple with problems associated with raising young children in a split household, other concerns need to be addressed.

Financial issues are typically the most pressing. Numerous articles have been written on the tradeoffs that older divorcees make when seeking to start anew as their earning potential wanes. Without considering legal costs associated with the divorce proceedings, mature couples take a financial hit when divvying up sums amassed in retirement portfolios.

Additionally, Social Security benefits are reduced for those who are single. According to a Bloomberg report, "Married people who have never been divorced get an average of $22,607 per year from the federal retirement program, while single people divorced after 50 qualify for an average of $12,092." The small sum may explain why those seeking to end their marriage face a higher likelihood of becoming poor than their married counterparts. While older women seek out divorce more often than men, it is they who suffer more financially when the proceedings have concluded.

For these reasons, it is paramount that those ending their marriage make certain to receive whatever sums to which they are entitled. In the case of an acrimonious divorce, spouses may wrangle over asset distribution. Should the primarily wage earner resist divvying retirement funds, a former spouse may have limited recourse after the divorce settlement is signed.

The time to ensure continued payouts of retirement benefits takes place during proceedings. In filing a Qualified Domestic Relations Order (QDRO), the interested party begins the formal process of requesting that managers of the retirement account or pension plan send payment from the accumulated funds. Although the ex-spouse did not contribute a percentage of her salary to the retirement account, she is entitled to receive a portion of the funds.

These are three questions to answer drafting a QDRO:

1. What are the guidelines of the retirement account or pension plan?

While it may be expensive to pay for a professional to assess the terms of the pension plan, there are long-term benefits associated with having an accountant review the contract. This professional will be able to maximize monthly payouts by scrutinizing agreement and can present a recommendation that can be incorporated into the QDRO.

2. What terms are established in the QDRO?

As the purpose of the document is to take a portion of the retirement benefits of one spouse and give it to another, the lawyer charged with drawing up the agreement will not be impartial during the drafting process. Legal experts recommend hiring an independent attorney to write the document. Each spouse's attorney should then review the contract and make appropriate adjustments.

3. When is the best time to file the document with the court?

The QDRO should be filed with the court at the same time the divorce settlement has been finalized. Those charged with disbursing retirement funds will not act until this document has been approved by the court and has been received by the administrator of the account. It is not in the vested interest of the primary wage earner to release retirement funds to a former spouse, so filing the document with the court will ensure that the funds will be divided appropriately.

In order to receive what is due, former spouses need to file the appropriate paperwork in a timely manner. Those who are interested in securing retirement funds are advised to seek the counsel of a knowledgeable attorney.

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