Getting divorced in Virginia can have a devastating effect on your retirement account, whether you end up splitting it with your ex-spouse or drawing it down to pay off divorce expenses. Even if your retirement funds have not evaporated before your eyes, the time span right after your divorce is a good time to reconsider your investments and plan for the future.
Forbes reports that first of all, you must make sure that any retirement accounts are divided in accordance with the guidelines of the court-specified Qualified Domestic Relations Order. If the account being divided is your own, you must fulfill your financial obligations to your former partner. If you are receiving funds from your ex-spouse’s retirement account before age 60, you have a limited window of time in which you can withdraw the money rather than shifting it to a personal retirement account without paying a federal penalty.
After you have fulfilled these legal and financial obligations, the time has come to review your investment strategy. You may be happy with the status quo; however, you also may find that some of your financial planning reflects your former spouse’s preferences, not your own. If the latter is the case, you have some rethinking to do.
Take a look at your current income, retirement goals and investment habits. Ask yourself the following questions: How much are you making now? How much can you afford to contribute to your retirement fund? How much longer do you plan to work? These answers, among others, are important indicators of what changes, if any, you should make to your investment policy. You also should consider how much investment risk you are willing to tolerate. If you find that your risk tolerance has increased or decreased without the influence of your former spouse, consider raising the issue with your financial advisor.
Finally, if you have drawn up a new will post-divorce, keep in mind that you still may need to change who is designated as a beneficiary on your retirement account. A beneficiary designation is legally binding, which means that your ex-spouse might be in line to inherit some portion of your retirement fund even if your will indicates otherwise.
This information is provided for educational purposes and is not intended as expert legal advice.