Retirement Concerns for Divorcing Spouses

Over the past couple of decades, a growing number of people getting divorced in the United States are over the age of 50. These divorces are often referred to as gray divorces and plenty of people in Colorado have experienced them as well. When facing a divorce as retirement is looming nearer, concerns about these assets can be more important than they may be when getting divorced at 35.

For many couples, retirement accounts are some of the biggest assets to divide in their divorces. The U.S. Department of Labor explains that the use of a qualified domestic relations order is the way for people to potentially avoid early withdrawal fees and penalties when splitting retirement assets during a divorce. The reason for this is that a QDRO legally identifies the to-be former spouse as authorized to receive distributions from an account. This person is then referred to as an alternatee payee.

If money received by an alternate payee is properly invested into a different and qualifying retirement account, taxes and early withdrawal fees may be avoided. A QDRO can also set up spousal support payments using money in a 401K account. The recipient spouse would then be responsible for taxes on the income received.

NerdWallet adds that qualified domestic relations orders can be used to preserve a former spouse’s ability to receive a survivor’s share of a pension plan in case the owning spouse dies first. This can be a valuable source of retirement income and should not be overlooked in the divorce settlement process.


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