Many married couples in Florida spend decades saving for retirement. If the time comes to divorce, what happens to those funds is often in question.
Unfortunately, some couples may simply decide to withdraw the funds in order to divide them, which is misguided and can have unintended consequences. Taking the time to learn more about dividing retirement assets is often key to making well-informed decisions.
Dividing up your retirement account
Like when dealing with other important assets, it is very important to use precise language regarding how retirement accounts will be divided. For example, the transfer incident to divorce process is generally used with IRA accounts, while other plans are divided using a Qualified Domestic Relations Order (QDRO). Using the wrong term for an account can cause confusion when it comes time to actually divide funds.
Directly withdrawing funds is not an effective way to divide retirement savings either, as the IRS may treat it as a regular withdrawal and tax the funds. Instead, one should consider the age at which he or she would like to receive distributions. Depending on one’s age and the method of receiving the funds – such as directly from an account or after rolling over to an IRA – there may be penalties.
Divorce is a complex legal process. Florida couples often feel as if they must make a seemingly endless number of decisions at every turn, some of which may have long term consequences for the future. As such, it is often advisable to seek guidance when dealing with sizable assets during property division.