There has been a recent uptick in grey divorce, divorce over the age of 50, over the past few years. When couples in this age group get divorced, they often are concerned about the impact divorce can have on their retirement funds. Since retirement funds can be deemed marital property, they are subject to division during divorce. So how can you avoid unnecessary losses?
The Risk to Your Retirement Assets
When money is taken out of the account by the holders before they reach the age of 59 and 6 months, early withdrawal taxes may apply. These taxes can swallow up to 10% of the amount withdrawn.
How To Avoid This
If one spouse is ordered to receive a portion of the other spouse’s 401(k) or 403(b) account during division of property, the use of QDRO (Qualified Domestic Relations Order) can help you avoid the early withdrawal taxes. QDRO states all the provisions of the transfer of funds and prevents the transfer of funds from being classified as an early withdrawal. However, if QDRO is not filed and you take money from a retirement account and give it to the other spouse, that money is taxable.
Please keep in mind that all requirements of QDRO must be followed in full. Failure to follow them can result in your funds being taxable, thus costing you your hard-earned money.
Make Sure Your Accounts Are Protected
You worked hard to build up your retirement funds, so you need to make sure that they are protected. It is best to consult an experienced Illinois divorce lawyer to avoid the risk of losing these valuable assets. Talk to one of our attorneys today so we can work with you on getting the fair settlement your deserve in your divorce.