Divorce & Your Retirement Account

Pensions, IRAs, 401ks and other retirement accounts are frequently overlooked assets in a divorce. Many spouses are surprised to learn that they are entitled to a portion of their partner’s retirement nest egg, or they are surprised to learn that they must give part of their savings to their soon-to-be-ex-spouse. The actual nuts and bolts of the division in Central Florida depends on the type of account and several other factors, but the principles are nearly always the same.

General Formula

Typically, the division considers the length of the marriage, the length of employment and the amount of money. If Husband worked at Orlando’s XYZ Corporation for 20 years at the time his 10-year marriage to Wife ended in divorce, and the retirement account was worth $100,000, Wife is generally entitled to $25,000, which is half of the value accrued during the marriage.

Military pensions work a bit differently, and there are several different ways they can be divided. The Coverture Fraction Formula is the most common method; instead of a sum of money, the nonmember spouse receives a portion of future payouts. The former spouse can also elect a lump-sum payout, but loses eligibility for future cost-of-living adjustments.

Qualified Domestic Relations Order

The QDRO (pronounced quad-ro) is the form that actually divides the money. Most employers have their own preferred format and their own options for distributing the funds. The retirement account can also be used as leverage in negotiations; for example, a spouse may elect to waive interest in a retirement account in exchange forconcessions regarding alimony.

Do not overlook retirement accounts in planning for divorce. For a consultation with attorneys who have your best financial interests in mind, contact our office.