Protecting Retirement Investments in a Divorce

Barbara Marquand | guest writer for GoTalkMoney

With more than half of first marriages and sixty percent of second marriages ending in divorce, you're certainly not alone if you're facing the difficult task of piecing together a new life after the ending of a marriage. More than 2 million Americans get divorced each year.

Aside from the practical and emotional challenges are long-term financial issues, and among these are your retirement investments. Oftentimes retirement investments are a couple's largest asset, or are at least second after the house. Don't get so caught up in the short-term financial details of divorce that you overlook tending your nestegg. Good decisions about retirement made now will help secure a solid financial future later.

Retirement Investments: What To Consider

Here are key things to do and consider, according to the National Endowment for Financial Education:

• Social Security Benefits

Contact the Social Security Administration to request a Personal Earnings and Benefit Estimate Statement. This will project how much Social Security income you'll get based on your earning history. If your benefit is paltry, bear in mind you might qualify for a portion of your spouse's benefit instead. You can get up to fifty percent of your spouse's Social Security benefit if you were married at least ten years and you haven't remarried by the time you apply for benefits. The earliest you can receive benefits is usually age 62. If your spouse made a lot more money than you did and you're just under that 10-year mark, you might want to put off the divorce a bit so you can qualify for benefits based on your spouse's earnings.

• Retirement Plans and Pensions

A first step is to find out what retirement plans and pensions you and your spouse have. Don't forget about retirement plans at former jobs. Gather the records for all these investments before you see your attorney. Retirement investments could very well be your largest asset, so carefully consider any decisions about retirement plan distributions. Under federal law, you're entitled to receive a portion of the benefits earned by your spouse during the marriage. You'll need a court-ordered document called a Qualified Domestic Relations Order to direct the administrator of the retirement plan on how to divide the benefits between you and your spouse.

Mind the Details to Protect Investments

Take extra care with splitting up retirement plans. The Wall Street Journal reported recently that neglecting or mishandling a QDRO can have dire consequences if the details are not spelled out carefully. Even couples who intend to be fair and equitable can end up burned if the agreement isn't worded exactly right.

You don't need a Qualified Domestic Relations Order to split up IRAs. A divorce decree shows how they should be divided.

• Cash Flow

If you need money right away and don't want to wait a long time to receive benefits you can negotiate for cash or property that's equal to the value of your spouse's retirement assets. But consider other means first to protect your nest egg for retirement. Consider downsizing your lifestyle. You might be better off selling the house and moving to a smaller, more affordable home. Eliminate unnecessary expenses, and create a realistic spending plan. Consider ways to boost your income, such as working a second part-time job.

Finally, bring on a financial legal expert to help if your divorce attorney isn't highly skilled in working out details for retirement. Although many divorce attorneys have the experience and resources to handle this aspect, some might not have the specialized skills you require. If your attorney shrugs off the retirement issue as a slam-dunk, get other help.

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

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