It is important to consider your future retirement plans when you are going through a divorce. Odds are high that you and your spouse have made retirement plans jointly, and you will need to separate your finances as the marriage comes to an end.
If you simply have savings, this process can be relatively straightforward. You have already set the money aside in a bank account or an investment portfolio, and you can divide these accounts between the two of you.
But in other cases, you may be relying on future benefits from a pension or investments. Perhaps your spouse has been earning retirement benefits as part of their employment compensation package. They will not actually start receiving monthly payments until they retire, but these benefits are still a marital asset because they were earned during the marriage. How do you divide them so that each party gets their fair share without also triggering expensive early-withdrawal penalties?
Setting up a qualified domestic relations order
Often, the solution that couples use is known as a qualified domestic relations order (QDRO). It allows you to make these decisions in advance.
The QDRO establishes a percentage of payments that should be made to an alternate payee. Once your spouse retires, since you are named as the alternate payee, you receive these retirement benefits.
The exact percentage is unique to your marriage. It is often based on factors like what percentage of the overall retirement package was earned during the marriage, as opposed to portions that were earned before or after. So, while the solution may be unique from one relationship to the next, it is important to know what legal options you have to split up this marital property.