A document known as a Qualified Domestic Relations Order (QDRO), which is a part of a divorce settlement, specifies how retirement assets are divided. A QDRO specifies the amount or portion of a plan participant's benefits that are paid to a spouse, former spouse, child or other party. A QDRO typically governs assets within a retirement plan such as a pension, profit-sharing plan, or a tax-sheltered annuity. Benefits paid to a former spouse typically are considered income for tax purposes. If you contributed to your retirement plan, a prorated share of our investment is used to determine the taxable amount.
Former spouses on the receiving end of a lump-sum distribution mandated by a QDRO may be able to roll over the money tax free to a traditional individual retirement account or to another qualified retirement plan. Following such a transfer, assets within the plan are subject to rules that would normally apply to the retirement plan. If you transfer assets within a traditional IRA to your spouse as part of a divorce decree, the transfer is not considered taxable and the assets are treated as your former spouse's IRA.
Procedural Issues
QDROs are governed by rules established by the US Department of Labor. In most instances, a judge must formally issue a judgement or approve a settlement agreement before it is considered a QDRO. The fact that you and your soon-to-be-former spouse have signed an agreement is not adequate for a QDRO to take effect. Also, following an order issued by a judge, the administrator of the retirement plan affect by the QDRO must determine whether the court order qualifies as a QDRO according to the rules of the labor department.
Note that retirement assets are part of a broader financial picture that may include your home, taxable investments, personal property, and other assets. It is not mandated that your spouse receive a portion of your retirement assets while granting other assets to your spouse. In addition, a prenuptial agreement, depending on its provisions could potentially limit your spouse's rights to your assets. You may want to consult a divorce lawyer and your advisor to determine whether federal laws relating to retirement accounts apply to your situation.
Showing posts with label retirement accounts. Show all posts
Showing posts with label retirement accounts. Show all posts
Monday, August 27, 2012
Tuesday, July 10, 2012
Three-Step Retirement Plan Tune-Up
Even if your personal outlook hasn't changed, keep in mind that uneven returns provided by different investments may have caused your portfolio to shift from your intended asset allocation.
Conducting an annual review of your retirement goals and strategy is a great way to help ensure that your plans for your financial future remain realistic and on track. With that in mind, taking the three easy steps outlined below will help you conduct your retirement tune-up.
Step 1: Review your retirement goals
Your first step should be to review your retirement savings goals and assess whether anything significant has occurred during the past year that might affect either your outlook for retirement or your current strategies to prepare for it. For example, have you decided to change the date when you'll retire? Or have you experienced any new milestones such as getting married, divorced, or having a child? Any of these events may affect how much you will want to save to fund the retirement you envision.
Step 2: Take a fresh look at your retirement strategy
Your portfolio's specific mix of stocks, bonds, and cash, known as your asset allocation, should complement your financial goals, risk tolerance, and time horizon. If you haven't taken a fresh look at your investments in awhile, don't assume that your old asset allocation is still appropriate for your current needs. Even if your personal outlook hasn't changed, keep in mind that uneven returns provided by different investments may have caused your portfolio to shift from your intended asset allocation. Given the market volatility that has occurred since 2007, if you have not reviewed your asset allocation since that time, there may be a good chance that uneven returns have caused it to change. If your asset allocation needs to be rebalanced, now may be the time for action.
Step 3: Consider saving more
None of us know what the future might hold. A good way to improve the odds that you have saved enough for retirement is to save more, no matter how prepared you may already be. If you have not already done so, consider funding an IRA. To find funding limits for your IRA account, more information can be obtained at www.irs.gov. If you participate in a workplace-sponsored retirement plan -- such as a 401(k), 403(b), or 457 -- you can contribute up to $16,500 for 2011. Those aged 50 and over can add up to another $5,500. If you are eligible for a plan at work, but haven't enrolled yet, what are you waiting for?
Conducting a retirement tune-up is always a great idea, but don't forget to consult with your financial advisor to discuss what else you can do to help achieve retirement security.
Conducting an annual review of your retirement goals and strategy is a great way to help ensure that your plans for your financial future remain realistic and on track. With that in mind, taking the three easy steps outlined below will help you conduct your retirement tune-up.
Step 1: Review your retirement goals
Your first step should be to review your retirement savings goals and assess whether anything significant has occurred during the past year that might affect either your outlook for retirement or your current strategies to prepare for it. For example, have you decided to change the date when you'll retire? Or have you experienced any new milestones such as getting married, divorced, or having a child? Any of these events may affect how much you will want to save to fund the retirement you envision.
Step 2: Take a fresh look at your retirement strategy
Your portfolio's specific mix of stocks, bonds, and cash, known as your asset allocation, should complement your financial goals, risk tolerance, and time horizon. If you haven't taken a fresh look at your investments in awhile, don't assume that your old asset allocation is still appropriate for your current needs. Even if your personal outlook hasn't changed, keep in mind that uneven returns provided by different investments may have caused your portfolio to shift from your intended asset allocation. Given the market volatility that has occurred since 2007, if you have not reviewed your asset allocation since that time, there may be a good chance that uneven returns have caused it to change. If your asset allocation needs to be rebalanced, now may be the time for action.
Step 3: Consider saving more
None of us know what the future might hold. A good way to improve the odds that you have saved enough for retirement is to save more, no matter how prepared you may already be. If you have not already done so, consider funding an IRA. To find funding limits for your IRA account, more information can be obtained at www.irs.gov. If you participate in a workplace-sponsored retirement plan -- such as a 401(k), 403(b), or 457 -- you can contribute up to $16,500 for 2011. Those aged 50 and over can add up to another $5,500. If you are eligible for a plan at work, but haven't enrolled yet, what are you waiting for?
Conducting a retirement tune-up is always a great idea, but don't forget to consult with your financial advisor to discuss what else you can do to help achieve retirement security.
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