Many people who get divorced often squabble over money. Not only is money one of the main causes of divorce, it’s also one of the things that people fight over the most during a divorce. One of the biggest assets most people have are retirement accounts and they’re also the asset that is hardest to divide up. Below you’ll find some information about these retirement accounts and what a QDRO does.
The types of accounts
There are two types of retirement accounts that most people are familiar with, savings plans like 401(k)s, IRAs, 403(b)s and 457(b)s are generally offered by employers to their employees. These types of accounts are chock full of benefits. You don’t pay taxes on the income you contribute to the plan and you won’t be taxed on the income you build over the course of the plan. You only pay taxes when you withdraw the money at age 59 ½.
A different type of employer sponsored retirement account is called a pension. Pensions are calculated based on a formula set out by the employer and are usually based on the number of years worked and the amount the person earned. Unlike 401s and 403s, you don’t have to wait until you’re 59 ½ if the terms of your employment allow you to start taking your pensions payments earlier.
Finally, there are IRAs. IRAs are used by people who do not have an employer sponsored plan and offer similar tax benefits although they have a lower contribution limit than employer sponsored plans.
What’s eligible for a QDRO
Almost all of these plans can be divided as a part of your divorce settlement. Qualified plans like a 401 or 403 can be divided using a Qualified Domestic Relations Order or QDRO for short. QDROs tell the administrator of a plan to pay a portion of the plan to a non-employee. The non employee (i.e. your spouse) can then roll this money over into an IRA. Most IRAs can be divided without a QDRO by using just the divorce decree and some other paperwork.
Pensions can also be divided by QDROs providing that the pension plan qualifies. In Georgia, firefighter and police pensions as well as military pensions are subject to QDROs while teacher pensions are not as per O.C.G.A. § 47-3-28.
Once you discuss how you want to divide your assets with your spouse, we can help you get the QDRO done so that everyone walks away in agreement. Uncontested Divorce can be a peaceful and less stressful way to end your marriage. Once you have discussed your options with your spouse, reach out to us for a low cost initial consultation so we can help you complete the process in an efficient and dignified way.