Getting divorced in New Jersey can be an emotionally and financially tumultuous time no matter how short or long of a time a couple has been married. However, it can be especially stressful the closer a couple is to retirement. Two particular retirement savings vehicles, the IRA and the 401(k), are treated differently during the divorce process.
An IRA can easily be split between two divorcing spouses without the need for a court order. Two spouses can simply add up how much IRA money they have in total. Then, they can divide this total by two (or an other agreed-upon amount) so that both spouses get their fair share of the IRA money. If a couple has three IRAs instead of only two, it’s possible that just one of the IRAs needs to be split so as long as both spouses get their fair share of the IRA money covering the three accounts.
Splitting a 401(k) is a bit more involved. Before dividing a 401(k), obtaining a qualified domestic relations order, also known as a QDRO, is necessary. Any defined-benefit pension also requires this type of order as part of the division process. It is ideal if spouses going through divorce can get their QDRO signed by a judge at the same time their final divorce judgment is also being signed.
Approaching retirement can be intimidating for any worker in the United States, but it can be particularly unsettling for those who have gone through divorce. Understanding one’s rights when it comes to the division of retirement funds and other assets is paramount for ensuring that one is not taken advantage of during the asset division process. An attorney can provide the necessary guidance to make sure that the most personally favorable outcome is attained during a divorce proceeding in New Jersey.
Source: thestreet.com, “How Divorce Affects Social Security and Retirement Accounts“, Robert Powell, Dec. 15, 2017