5 ways to keep your retirement money safe

Divorcing in New York often means splitting retirement accounts that took decades to build during your marriage. While a divorce decree may say that you are entitled to a share, many workplace plans (like 401(k)s and pensions) require a Qualified Domestic Relations Order (QDRO) to tell the plan administrator how to pay it. However, errors in this paperwork can result in losing a portion of your expected funds, so it’s important to know what to avoid.

Don’t miss plan deadlines

Some retirement plans have strict windows for submitting a QDRO after a divorce is finalized. If a former spouse retires or passes away before the paperwork is finished, you might lose your right to some or all the money. Submitting a draft for pre-approval and filing the final order with the court as soon as the judge signs the divorce can prevent these delays.

Valuation date matters

The value of a 401(k) or IRA changes every day based on the stock market. If your QDRO uses an old date or fails to mention market gains, you could miss out on thousands of dollars in growth. One option is to specify an exact date, such as the date the divorce started. Another option is to include language regarding investment gains and losses.

Handle hidden account loans

If your spouse took a loan against their retirement account, the total balance shown on a statement might be misleading. Without specific instructions, your share might be calculated after that debt is subtracted, leaving you with less. You must decide if the split should be based on the balance before or after loans are paid.

Account for the rising cost of living

A pension payment that covers your bills today may not be enough to live on in twenty years. Many pensions offer cost-of-living adjustments that must be mentioned in the QDRO for you to receive them. If this language is missing, your monthly payment remains flat while prices for goods and services rise.

Secure your rights as a survivor

If the plan participant dies, pension benefits can stop unless the divorce paperwork and QDRO give you survivor-benefit rights. This is a common pitfall in New York divorces involving long-term pensions. Adding these survivor protections ensures you are covered even if your former spouse passes away.