Do Not Forget To Protect Your Retirement Plans When Divorcing
When you and your spouse divorce, your focus might be on the present and immediate future. However, you should also think beyond that to your retirement. Divorce can impact every aspect of your life, including what happens when you retire. Here are some suggestions on how you can protect your retirement throughout the divorce process.
Review the Rules of Your Retirement Plans
Your retirement plans likely have rules that address what happens if you divorce. You need to know what those are so you can consider them while working on a settlement with your spouse. Failing to do so, could have a financial impact on your future.
For instance, if you have borrowed from your 401(k), the debt is likely considered to be a joint obligation since the loan was taken out during your marriage. If you are not aware of this, you could be left to repay the debt alone.
Update Your Beneficiaries
Your divorce attorney will likely advise you to update your estate planning documents shortly after the divorce petition is filed. Unfortunately, some people believe that updating their will is enough to ensure that an ex does not inherit part or all their assets, including the payout from a retirement plan. However, this is not true.
Unless you contact the company or person who is managing the retirement plan and update your beneficiary, there is a possibility that your soon-to-be ex ends up inheriting from the plan. The procedure to update the beneficiary can vary, but you will likely need to make the change in writing.
Know Your Social Security Benefits Rights
According to the Social Security Administration, you can receive retirement benefits from your ex if you were married at least 10 years. To receive those benefits, you must meet certain requirements. For instance, you cannot be remarried.
You will need to be designated as a survivor to receive the benefits. To ensure you are listed as one and to check whether you meet the other eligibility requirements, work with your divorce attorney. If you are approved for benefits, you will begin to receive benefits when both you and your ex reach 62 years of age.
There are other retirement plans considerations that should be factored into your divorce negotiations. Your divorce attorney can help you determine what those are and work with you and a financial advisor to ensure your financial future is factored into the final divorce decree.