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5 Retirement Moves For Recently Divorced Couples

5 Retirement Moves For Recently Divorced Couples

By Marilyn Timbers, Next Avenue Contributor

Couples who have recently finalized their divorce and divided up assets are understandably eager to move on to the next phase of their lives. But closing the book too hastily on your previous relationship could result in some unintended financial consequences.

If you have recently parted ways with your spouse, here are five important steps you need to take to protect your assets and shore up your retirement plan:

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1. Make sure the retirement plans are divided according to the divorce agreement.

The IRS requires a QDRO (Qualified Domestic Relations Order) in order to divide money in a retirement plan between two parties. A QDRO is a court-ordered document that specifies how the assets will be divided. In many cases, you must also provide this order to your retirement plan provider, and follow up with them to make sure the document has been received and processed.

If you are eligible to have your share of those assets deposited into your retirement plan, be aware that there is a one-time opportunity for a divorced spouse (under age 59 ½) to withdraw money from an ex-spouse’s retirement plan without paying a 10% Internal Revenue Service penalty.

So, if you’re under 59 ½ and need a portion of your ex-spouse’s retirement savings to pay some immediate expenses, you may want to pull that money out before you roll the funds into your own retirement plan. You will have to pay taxes on that transaction, but you will avoid the 10% penalty. You may want to discuss with a financial adviser how the withdrawal could impact your long-term savings goals.

2. Change the beneficiary designations on your retirement accounts. Even if you’ve had a new will drawn up due to the divorce, you still…

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