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3 ways to handle retirement accounts in your divorce

With the exception of your real estate holdings, your retirement accounts are probably the most valuable asset that you share with your spouse. The two of you will likely disagree about the best way to handle your retirement savings if you get a divorce.

There are multiple ways for couples to approach retirement accounts, and the three below are some of the simplest and most popular solutions.

Create a QDRO to split the account

If the courts order you to divide the account or you have a prenuptial agreement that demands the division of the account, a Qualified Domestic Relations Order (QDRO) is the tool you should use.

A QDRO has the weight of a court order behind it and effectively prevents any sort of tax penalties for your early withdrawal of retirement assets.

Negotiate spousal maintenance

Perhaps your retirement plan involves not a specific account but rather your ownership interest in a business or an employer-sponsored pension that you can not withdraw money from now.

If you plan to have some other source of income after you retire, you may agree that the spouse receiving that income will  pay the other spouse maintenance in the amount of their share of the retirement benefit or pension.

Offset its value with something the other spouse wants

If you want to keep the entire retirement account for yourself, negotiating with your spouse might be the best approach. They might accept other assets with similar financial value or substantial emotional value instead of receiving money directly from the retirement account.

Careful review of your financial records with your attorney and perhaps a financial adviser as you plan for your divorce will make the process of determining how to divide retirement assets easier.