My husband said I would get half his pension,but I had to wait till he retires or get penalized,is this true
Diane, If your husband's plan is a qualified plan, you might be able to receive as part of your divorce settlement Qualified Domestic Relations Order (QDRO),a court judgment, decree, or order. The QDRO specifies what the plan administrator is to do with the spouse's share of the plan.
There are a few options to separate assets in a QRO: One option is to segregate your portion of the plan until your husband reaches retirement age. At that time, the you can access the funds. With this approach, you are treated as a participant in the plan. The employee's defined contribution plan balance (or defined benefit plan accrued benefit) is valued as of a certain date, and that benefit is divided between your husband and you in accordance with the QDRO. Once divided, the you are treated similarly to a terminated participant with a vested deferred benefit.
If the plan allows, the plan administrator can distribute to you the full amount of money due. You can then either keep the money and pay tax on it now, or roll it into an IRA within 60 days, delaying taxation until later. There are also certain advantages to this approach. For example, if you need cash now for living expenses, you can keep all of the distribution. Also, you're able to control the investment decisions. However, there are some drawbacks: if you don't roll the money into an IRA account within 60 days, you may be subject to income tax (and perhaps the 10 percent penalty tax) and you'll lose the long-term tax-sheltering advantage as well as the retirement savings if you spend the money now.
An alternative option is to trade the retirement assets for something else. For example, a divorcing couple can simply decide that one spouse gets the entire retirement plan and the other gets the house plus alimony. Or perhaps the other spouse gets a big cash buyout right now instead of a claim on the pension assets.
You should retain the advice of an attorney and a financial professional to help you weigh the pros and cons. Hope this helps. Chris
This is usually plan specific, but in general, the plan likely has payouts related to the employee's age, time at the company and his status (retired or still employed). Any early distro would likely decrease the benefit amount. If the retirement were non pension (say a 401(k) or profit sharing plan) then there is likely a QDRO that splits the account (no ongoing pension involved) and you can get your half based on the date of the QDRO.
As noted, a pension plan may have certain restrictions regarding payouts, but I believe (and I will defer to the CPA's in the community) distributions from a qualified retirement plan as a result of a QDRO are exempt from the 10% early distribution penalty.
I am not sure of your age, but you will also have potentially several options available to consider regarding Social Security and how you access your benefits or even his. If you or he are older and approaching 62, please advise and I can share some options you may want to consider. If not then at least make a note that in the future you will have some additional options for consideration.
Best of luck