If you’ve recently been through a divorce, you’re probably ready to put it all behind you. Divorce can be an emotional roller-coaster, and it can also tax your tolerance for detail-oriented financial questions. Take a moment to ensure your retirement plans are still on track. Here are five quick steps to take:
No. 1: Make sure your property division is fully implemented
Whether you negotiated the division of your assets or a court ordered their division, the decision needs to be carried through. When it comes to your retirement accounts, that means providing a copy of your qualified domestic relations order (QDRO) to your plan administrator. A QDRO is a court order that authorizes the plan administrator to divide retirement assets according to your divorce decree.
Be sure to provide this document to all of your retirement and pension plans and make sure your divorcing spouse does so for the accounts they control. Follow up with each plan to ensure the document was received and complies with the terms of the plan. If problems arise, contact your divorce attorney.
Also, if you’re under 59-1/2, be aware that you may have a one-time opportunity to withdraw money from your ex’s retirement account without paying the usual 10% IRS penalty.
No. 2: Change your beneficiary designations
Most people list their spouses as the primary beneficiary for their 401(k)s, 403(b)s, pensions and other retirement accounts. A beneficiary designation is a legally binding document, and the fact that you are divorced does not necessarily change the designation. That means your ex could end up with a huge windfall should something happen to you.
No. 3: Review your Social Security benefits
People who are married for more than 10 years before divorcing may have a choice to make regarding their Social Security retirement benefits. You can choose to receive your own benefits or half of your ex-spouse’s benefits. You should choose the one that pays you more. If you remarry before age 60, however, you lose the right to choose half of your ex’s benefits.
No. 4: Reestablish your savings goals
Now that you’re single, the amount you have saved for retirement may no longer be enough. You should begin with a new estimate of what you will need to retire at the time and in the manner you choose, then adjust your savings goals.
No. 5: Adjust your asset allocation
As part of your overall reassessment of your retirement savings and goals, you may wish to reassess your risk tolerance and change your investment mix.
Take these steps to ensure your retirement savings stretch as far as they need to after your divorce.