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What is a qualified domestic relations order?

Divorce can be complicated at an older age, often from a financial perspective. This is especially true for couples who are nearing retirement age. Getting divorced means dividing their assets, and this can cause some problems with their long-standing retirement plans.

This is especially problematic because gray divorce is growing more common. Older individuals who are closer to retirement age are splitting up more often, meaning that they have a lot of financial questions to ask and future planning to do. What is a qualified domestic relations order (QDRO) and why is it important in this situation?

How a QDRO can help you during divorce

In short, a QDRO divides a retirement plan. It does so in advance by specifying how that division should be carried out in the future and what percentage of the monthly payments should go to each person.

For instance, a couple may have been planning to retire on a pension plan. They would’ve shared 100% if they were still married. In the divorce, though, 30% may be assigned to one spouse, based on the length of their marriage, when they earned the pension and other such factors. The other 70% may go to the spouse who was employed and technically earned that pension.

The benefit of this is that these decisions could be made years before the person actually retires. They don’t have the assets to split up at the time of the divorce – they may still be a decade from retirement – but the QDRO puts a plan in place to divide that asset once they actually retire and start receiving it. 

It’s wise to do this in advance to protect those retirement plans. If you’re interested in something like this, take the time to look into the necessary legal steps.