Florida couples who are undergoing divorce often make mistakes when dividing their retirement assets. These mistakes can be both costly and time-consuming. By understanding what these mistakes are, you could avoid making them.
Early withdrawal penalties
When you’re splitting up a private-sector retirement plan, it typically falls underneath ERISA compliance laws. These laws do require that any funds that are withdrawn too early from the retirement account will be hit with a penalty. The important thing to understand about this is that there are specific instances where a penalty can be avoided while the funds are withdrawn early. Some examples include divorce, child support and alimony. You’ll simply need to submit a Qualified Domestic Relations Order to your qualified plan administrator.
Not establishing a date of division
Retirement accounts continue to be contributed to throughout the divorce process. For this reason, it’s important for both parties to establish a clear date of division of the account. If not established ahead of time, the amount that each party is awarded will differ. It’s best to establish this date early on in the litigation process and make sure it’s included within your settlement agreement.
Not accounting QDRO processing fees
When you submit a QDRO form to have your retirement accounts dispersed, it’s very likely that the plan administrator will charge you a processing fee. They also will charge you even if that the form is rejected for any reason. These fees can range anywhere from $300 up to $1,800 per form that is submitted. Because this is a sizable chunk of money, it’s important that you address how it will be paid for in your divorce settlement agreement.
Going through a divorce can be a very mentally taxing process. It’s a good idea to have a plan going into your divorce with specific goals. By understanding the common mistakes that we went over above, you can set yourself up for the best chance of success during your divorce proceedings.