Tip #6: Understand TheBasics of Pensions, IRA's, and Social Security

What You Need To Know About Pensions, IRA's, Social Security

With your home, the pension and retirement fund that has been built up during the marriage can make up the bulk of the marital estate. In most states, retirement plans are divisible on divorce. But there are many different kinds of retirement plans and many complex rules. Be sure to discuss with your lawyer the type of plan involved in your situation.

Find out how pensions and IRA's are valued and divided in your state. Remember, each plan is different and you must be sure that an appropriate court order (called a QDRO Qualified Domestic Relations Order) is issued. Make sure to find out the tax consequences of pension distributions and if you will be affected. And look into roll over possibilities if the pension is to be divided.

Generally, the sums which make up a pension fund cannot be used immediately without taxes and penalties...unless you are of the age designated by the plan. But if you decide you need the money, you should first find out what the penalty is and then decide if the penalty is worth taking out the money.

There are different types of rules for different types of pensions. There are alternatives available regarding taking a lump sum or a distribution by the month after retirement. You must find out which rules apply in your case as far as distributions and roll overs. These are complex questions that your lawyer should answer for you.

You need to research into the best place to invest (roll over) these sums safely pending withdrawal. But be careful. You are best advised to remain conservative and not look to take risk.

Social Security entitlement must be researched and considered before divorce. Generally, if a marriage has lasted for 10 years or more, a 62 year old non wage earning spouse has the right to draw on the wage earner's benefits, even if the wage earner has not begun drawing benefits. A trip to your local Social Security office will answer many of these questions, including the amounts and taxation effects of these payments.

Military and civil service pensions are handled differently. You may want to check with the local Judge Advocate's office or civil service office for the latest survivor beneficiary rules. Or call your congressman or senator.