Navigating a divorce can be challenging, and the financial implications are often substantial. For those going through a divorce in New Jersey, one significant aspect to consider is how the separation may impact their retirement portfolio.
Understanding the potential effects on your financial future is important as you work through the complexities of ending a marriage in the Garden State.
Division of assets
The division of assets is a key element of any divorce. Retirement savings are no exception. In New Jersey, marital property undergoes equitable distribution, meaning that the court aims to divide assets fairly. However, this does not always mean things are equal. Retirement accounts accumulated during the marriage become joint assets and may be subject to division between the spouses.
Qualified Domestic Relations Order
In the context of retirement accounts, the court may issue a Qualified Domestic Relations Order. This facilitates the division of assets. A QDRO is a legal document that outlines the terms of the division, specifying the portion of the retirement account awarded to the non-contributing spouse. It is important to ensure the proper execution of a QDRO to avoid potential tax implications and penalties associated with early withdrawals.
The division of retirement assets can have a lasting impact on your future retirement income. Depending on the size of the retirement accounts and the division terms, both spouses may experience a reduction in their expected retirement funds. However, CNBC notes that those whose marriages lasted at least 10 years may be eligible for up to 50% of their former spouse’s Social Security retirement benefits, depending on eligibility.
As you navigate a divorce in New Jersey, engaging in long-term financial planning is helpful. Reevaluate your financial goals, adjust your budget and consider seeking the advice of a financial planner.
Taking proactive steps towards long-term financial planning can help you secure a stable financial future as you transition into life post-divorce.