A 401(k) or pension is often one of the largest assets a person owns. Employees contribute money from paychecks for years into the account with the hope they will accumulate enough funds to retire comfortably. Employer-sponsored retirement plans are excellent ways to acquire wealth. The accounts help many people supplement Social Security income so they are able to enjoy life after leaving the workforce. In families where one spouse contributes significantly more to their 401(k), the lower-earning spouse could be left without enough money to retire if they get divorced.
Qualified Domestic Relations Order
An employer-sponsored retirement account like a pension or 401(k) cannot be divided like other marital assets and debts. These accounts are bound by special IRS rules, and spouses who want a portion need to ask their Divorce Attorney in Jefferson County MO to file a qualified domestic relations order, or QDRO. A QDRO must document the alternate payee’s name and address as well as the amount or percentage of funds they have been awarded from the retirement account.
Options for the Former Spouse
A former spouse with a QDRO has options when it comes to their portion of the funds in a retirement account. The first option is to leave the money where it is and pay the fees associated with their portion of the account. This could allow the money to grow at the same rate as the other spouse’s funds. If the account has been growing, the original owner has an incentive to keep the same investment strategy.
On the other hand, if the account has been growing at a slower-than-average rate, it might make more sense to roll the funds over into another retirement account. With the help of Wegmann Law Firm, a former spouse with a QDRO can roll over their portion of the account without any penalty.
Unlike other assets, divorce decrees do not affect retirement accounts. In order to get those kinds of accounts separated so the lower-earning spouse has access to the funds, a Divorce Attorney in Jefferson County MO could file a qualified domestic relations order with the court prior to the final decree.
