One of the reasons that people equally maximize their deposits into retirement accounts in any given year is the potential tax benefit that comes from making such deposits. However, if you find yourself in the position where you must withdraw funds before you reach a certain age, that could leave you vulnerable to major penalties and fees.
Divorce is often a situation in which people have to access, withdraw or split their retirement funds. Provided that you do so as part of the asset division process for your Hawaiian divorce and not just to pay for costs, you will have certain protections when you do so.
Concern about the expenses involved in dividing your retirement can cause significant stress. Although the chances are good that you could wind up sharing your retirement or pension, if the courts order the division of those funds, you won’t have to worry about penalties.
How the Hawaii family courts divide retirement accounts or pensions
For most couples, retirement accounts or pensions will only have one spouse’s name on them. Many times, the account may be held through an employer, meaning only one spouse ever contributes anything directly to the account.
Whether your name is on the account or not, in the event of a divorce, you likely have shared ownership interest in the balance accrued during your marriage. Exactly how the courts will split the account is up to their discretion, but they will typically do so by issuing a Qualified Domestic Relations Order (QDRO).
A QDRO is a legal document that orders the division of retirement funds or pension benefits between spouses as part of the divorce. Provided that the division occurs in compliance with the QDRO, neither you nor your spouse should have to worry about any penalties or fees.
Dividing your retirement funds may require careful planning
The longer you have remained married and the closer you are to retirement age, the more financially complicated things become when you need to split your pension or retirement savings. In some cases, you may need to plan to work for longer than you would like.
Other times, changes to your retirement plans, such as choosing to share living space with someone else or scaling back your travel expectations, can be enough to offset the reduction in retirement savings that you experienced because of the divorce.