Protect Your Financial Future During Divorce

Divorce is an emotionally charged and complex process. While emotions often take center stage, the financial consequences of a divorce—particularly regarding retirement accounts—can have a long-lasting impact on your financial well-being. Make sure you avoid taxes & penalties in a divorce.

At RFG Wealth Advisory, we understand how easy it is to make costly mistakes during this time, especially when it comes to dividing retirement assets. That’s why we’ve created a helpful resource: “Avoiding Mistakes in a Divorce.”

Avoid Unnecessary Taxes & Penalties in a Divorce (click here for a video summary)

1. IRAs and Divorce: When dividing an IRA, it’s essential to use specific language in the marital settlement agreement (MSA) and providing the IRA custodian with a copy is essential. Transferring funds improperly, like withdrawing them directly, can trigger significant tax liabilities.
2. ERISA Plans: Splitting an ERISA plan like a 401(k) requires a Qualified Domestic Relations Order (QDRO), not just an MSA. The plan’s terms will dictate when the funds are available to the recipient.
3. Handling Received Funds: If you’re receiving funds via a QDRO and need to use them before age 59½, distributions directly from the plan are exempt from the 10% early withdrawal penalty. However, rolling them into an IRA and withdrawing later could result in penalties.
4. Update Your Beneficiaries: Failing to update your beneficiary forms is one of the most common post-divorce mistakes. This oversight can lead to ex-spouses inheriting assets intended for children or a new spouse. Don’t let this happen to you—review and update these forms immediately.
5. Reassess Your Retirement Plan: Divorce often brings significant financial changes. It’s the perfect time to reevaluate your retirement readiness and overall financial strategy to ensure you’re still on track to meet your goals.

These steps can help you navigate the financial aspects of divorce with clarity and confidence.

Financial Success Doesn’t Happen by Chance.

Contact lead advisor Chris Robinson or one of our other advisors at 940-464-4104 to schedule a time to discuss your transition questions. Let’s work together to safeguard your financial future.

RFG Wealth Advisory in Argyle, Texas, is an independent, fee-only Registered Investment Advisor firm that always puts our client’s interests first. We have a transparent, simple fee structure that’s easy to understand. Call us today!

Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.