You spend most of your marriage and career planning for retirement. If you end up divorcing shortly before you are due to cash in on these savings, it is natural to have concerns over how you and your former spouse will divide this sizable figure.
What should you expect going into this disheartening process? Understanding the possibilities can help you regain control over your plan for retirement.
Do retirement accounts count as marital assets?
The state of Florida practices equitable distribution of marital assets during a divorce. While the court may set aside any retirement earnings you accumulated prior to marriage, anything earned while legally joined is fair game for division.
This does not necessarily mean an even split of your pension. Rather, the court will distribute assets, including your pension, based on contributions made to the marriage. This is not limited to financial income. For example, a stay-at-home mom contributes to the household by providing childcare and managing the home.
Because your non-working spouse planned for retirement with your pension in mind and lived his or her life accordingly, it is only fair that a portion of these funds is available. However, there are many options for how your ex receives this money.
How do you execute the division of retirement savings?
Depending on the type of retirement plan you have, you will likely need to submit a qualified domestic relations order to the court. This form explains that you will withdraw a certain amount of your pension for the purposes of dividing assets.
The reason this is important is that early withdrawal often results in a 10% tax. When a divorce is the reason for taking money out, you become exempt from this tax. The QDRO also stipulates the exact terms of division, so there will be no confusion later on.
In some cases, you may be able to keep your entire pension in favor of giving your former spouse other equitable assets from the marriage. This is something you work out during the divorce proceedings.