Navigating the Complexity of QDROs in Gray Divorce

A QDRO, or qualified domestic relations order, is a crucial document used in divorce proceedings to instruct a retirement plan to pay a spouse or former spouse their community property rights in the plan. For older Americans going through a gray divorce, ensuring the QDRO is properly prepared is essential to avoid costly financial mistakes. There are two main types of retirement plans divided by QDROs: defined contribution plans (401(k)s, 403(b)s) and defined benefit plans (pension plans). Common errors with QDROs include attempting to divide non-divisible plans, failing to address loans or gains and losses in defined contribution plans, and not addressing survivor benefits in pensions. Logistical issues, such as who is responsible for drafting the QDRO or when it must be pre-approved, can also cause problems. It’s important to implement the QDRO once the divorce is finalized to ensure that both parties receive their fair share of retirement benefits. Including in-depth knowledge of the different types of retirement plans and potential errors to avoid, older adults going through divorce can protect their financial future by ensuring their QDRO is properly prepared.