What to do about pensions and Social Security after a divorce

This article looks at how private pensions, 401(k)s, and Social Security benefits are divided in divorce.

In any divorce, one of the most important steps to take will be dividing marital property. Particularly for older couples, but often for younger ones too, some of the most important assets that will need to be divided in divorce are pensions, Social Security benefits, and other retirement assets. These are assets that are subject to unique regulations and not understanding how they are divided in divorce could leave one or both ex-spouses facing severe penalties and high taxes that could significantly reduce their financial security.

How pensions are divided

Pensions and 401(k)s are likely to be some of the biggest assets people going through a divorce have, especially if they are divorcing later in life. As Time notes, the divorce rate for people aged 50 and over doubled between 1990 and 2010, which makes dividing these retirement assets even more important for a growing group of people.

It is imperative that people understand that splitting a private pension or 401(k) is not as simple as just withdrawing funds from the account and transferring them to an ex-spouse. Chances are that doing so will result in high taxes and hefty early withdrawal fees. As Reuters reports, those taxes can be close to 40 percent while the early withdrawal fee may be as high as 10 percent. What will be needed is a Qualified Domestic Relations Order (QDRO), which allows for the early transfer of funds without incurring these punitive taxes and fees.

There are also special forms that will need to be filled out when dividing other important financial assets, including IRAs, military benefits, and public pensions. Different states also have different rules on when and how somebody can claim spousal benefits on an ex-spouse's state pension.

Social Security spousal benefits

A divorce, fortunately, doesn't end one's right to claim spousal benefits on an ex-spouse's Social Security. While there are various rules and regulations that will need to be adhered to, in general so long as the marriage lasted for at least a decade and the claimant is over 62 then he or she can claim spousal benefits of up to 50 percent of what their ex-spouse will receive.

However, it is important to keep in mind that spousal benefits usually can't be claimed when one remarries. Although if the other spouse who is receiving the full Social Security benefits remarries then that usually doesn't affect the other ex-spouse's right to claim spousal benefits.

Family law assistance

Divorce is a difficult process, but it can be made less stressful with the help of a family law attorney. An experienced attorney can assist clients who are going through a divorce in a variety of ways, including by helping them divi de marital assets effectively and ensuring they understand what their legal rights are.