National statistics regarding marriage and divorce have drastically changed in recent decades. According to the U.S. Bureau of Labor Statistics (BLS), social factors such as the feminist movement, the increasing number of women in the American workforce, and altered perceptions of gender roles have contributed to these changing statistics. Also, the average age of divorce has continued to increase, as more people are getting married later in life or are remarrying. With this, of course, comes new challenges specific to getting divorced later in life. One of these challenges is the division of retirement funds.
Reported by The Wall Street Journal, there are new methods to ensuring that divorce during retirement age does not leave one spouse out in the cold. One such method is a qualified domestic relations order, commonly known as a QDRO. A QDRO is meant to help divide a divorcing couple’s retirement assets, regardless of what those may be. In a case where both spouses worked and had begun to build a livable 401(k) or other retirement fund, a QDRO may not be as necessary. It is definitely worth looking into regardless, especially if one spouse’s retirement plans are more fleshed out than the other’s.
A QDRO can also help to protect a person against unforeseen economic changes. The Wall Street Journaloffers an example of a hypothetical divorcing couple in mediation in 2008 who had $100,000 in a retirement account. The intent was to divide the account in half, equally, and the agreement stated that the wife would receive $50,000 of the account. However, when the market crashed, the wife ended up getting the lion’s share of the retirement account because of semantics. A QDRO could help to combat this type of situation.
It is important to understand what type of retirement account you are working with, however. Qualifying plans, notes the The Wall Street Journal, include 401(k)s and traditional pensions. “Non-qualified plans—which typically are reserved for upper-level employees and go by names like ‘supplemental executive retirement plan’ or ‘excess benefit’ plan—as well as stock options … are not subject to QDRO rules.”
Understanding what will happen with your retirement plan upon divorce is one of the most important steps of marital dissolution. If you are considering divorce in Illinois, seek the counsel an experienced attorney without delay. Contact a DuPage County divorce attorney at the law offices of Mulyk Laho Law, LLC today.