Getting a divorce when your spouse has a retirement account and you don’t can be a frightening undertaking. Even though you may recognize that Colorado law gives you the right to make a claim for some of the retirement account’s value, it is normal to worry about not having enough for a stable retirement.
Drafting a Qualified Domestic Relations Order is often a crucial step during divorces that involve retirement accounts or pensions. The QDRO, when approved by the courts and implemented by the person managing the retirement account, can give a spouse not currently on the account a portion of its value.
After all of the stress of filing for divorce and negotiating terms with your ex, you might unintentionally procrastinate with the final steps of your divorce, like submitting the QDRO to the individual or company that manages the retirement account or pension. Doing that can be a huge mistake.
Your ex could diminish the value of the account
One of the most compelling reasons to use a QDRO to divide accounts is that a QDRO helps you avoid those pesky early withdrawal penalties. If your ex is bitter, they might have no qualms about making a large withdrawal and incurring fees because doing so will diminish what you get from the account.
The longer you wait during your divorce to file the QDRO, the greater the risk of your ex making a withdrawal from the account or otherwise diminishing its value as a means of limiting what you get.
If you wait until after the divorce, your ex could die
Depending on your age and other factors, your ex’s death could end your claim to a share of retirement or pension benefits.
If an employer does not have an account but rather pays out a weekly or bi-weekly amount to recipients, you have to make a claim quickly. After your divorce, you will have few options if your ex dies, as only current dependents or spouses can continue to receive such payments.
Typically, in that situation, the pension will end regardless of the court order entitling you to some of it. You must have the paperwork filed either before your ex dies or the courts finalize your divorce. Timely action is as important as careful language when drafting a QDRO. Tactful handling of this crucial document can help set you up for a better retirement after your divorce.