Rebuilding Your Retirement Fund After a Virginia Divorce
By: John Whitbeck
Getting a divorce can have a major impact on your retirement savings and plans. During a Virginia divorce, you are required to split all marital assets in a fair and equitable manner, meaning your spouse could receive money from your 401(k), pension, or other investment funds. Even if your retirement accounts are not split, losing other valuable assets like real estate can impact your retirement plans.
Negotiate During Your Divorce
Splitting retirement accounts is tricky and can be quite complex. Perhaps you can negotiate and compromise by agreeing to let your spouse take another asset that is of similar value. Before any retirement funds can be distributed if they are part of the divorce, you need a QDRO (a qualified domestic relations order) that goes to the retirement plan administer telling them the account is being split tax-free. There may be fees from the plan administrator for QDROs as well. An experienced Virginia divorce attorney can help you with any questions you may have.
If you are both around the same age and have similar balances in your retirement accounts, then try to reach an agreement that you each walk away with your respective retirement accounts intact.
Contributing More to Your 401(k) Account
If you work for an employer that offers benefits like a 401(k) account, you’ll want to contribute as much as you can to start rebuilding your retirement fund. However, one potential problem after a spouse loses a large chunk of their retirement fund is the annual 401k contribution limits.
For employees who do not contribute the maximum amount, the annual limits won’t matter. This can be a good thing if you aren’t already contributing the maximum amount because it means you have the opportunity to increase it. This will help rebuild your retirement account faster, especially if your employer matches your contribution amount.
Check Beneficiaries After Divorce
One thing people often forget to do is update the beneficiaries on their accounts after a divorce. If you don’t remove your spouse from your 401 (k), he or she may still receive financial compensation. This also goes for life insurance policies and other investments like a Roth IRA. Conversely, in many instances, you automatically waive your beneficiary status upon divorce, so if the parties intend to keep that status in place, this needs to be addressed in any settlement.
Seek Assistance from a Financial Advisor
To get yourself back on track, you may want to seek guidance from a financial expert. Meet with someone who can help you chart out your goals and find out what it’s going to take to make up for the losses incurred in the divorce settlement. He or she can help with suggesting investments and what works best for your particular situation. However, be sure you retain a good financial advisor. Much like retaining the right Virginia divorce attorney, you want a financial advisor who has a good record and is someone you feel comfortable with.
To learn more about divorce, visit our Divorce Law page.
Related: Divorce Law
John C. Whitbeck, Jr. is the founder of WhitbeckBennett. His practice focuses on family law, special education law, and mental health law. He regularly practices in several jurisdictions in the Northern Virginia area. He has also been certified as an expert witness in litigation.