By: Charlene Laney, certified financial planner with NewMaker Financial

If through the course of divorce negotiations, you walked away with a part of your ex’s 401(k) (or some other qualified retirement plan), you likely went through a process designated by a Qualified Domestic Relations Order. A QDRO is a court order specifying how qualified retirement plan assets will be divided so that the financial firm administering the plan can legally take action. If you’ve already received your QDRO transfer, you are familiar with the QDRO process, as you likely had to fill out necessary paperwork and take certain steps (including waiting) to receive it.

Here are some tips if you are wondering what to do now that you’ve received your QDRO transfer. 

Open an Individual Retirement Account (IRA). Your QDRO transfer needs somewhere to go. In order to avoid tax penalty and additional income tax, you need to deposit the QDRO transfer into an account of your own within 60 days of the assets leaving your ex’s account. You may have already elected to do this when you filled out the financial firm’s QDRO processing paperwork. If that is the case, consider opening an IRA at the firm where you hold the rest of your investments for the sake of simplicity.

three blocks stacked that say IRA, Roth and 401k

Proceed with caution when combining the assets with your current IRA. It is best to keep assets that originated from a qualified retirement plan separate from individual contributions – meaning contributions that you made directly to an IRA. This is because assets that come from a 401(k) or similar plan continue to carry over their Employee Retirement Income Security Act (ERISA)-granted protections, whereas individual contributions do not. Equally important is to recognize your contributions’ tax status. Is the money pre-tax or Roth? Many qualified plans allow for both pre-tax and Roth contributions. If you received a QDRO transfer with both pre-tax and Roth assets, you will need an account for each as they have to remain separate in IRA’s.

Review your investments. If you have transferred these funds to a self-directed IRA, the good news is that you can now choose from almost any investment you would like! The bad news is that there are a lot of options to choose from. Many of the options are good, some are better, but it’s tough to know which ones are best for you. If you need help weighing your options, we recommend consulting with an investment fiduciary such as a certified financial planner. 

Charlene Laney CFP® is co-founder of NewMaker Financial, a financial advisory firm that advocates for and empowers clients during and post-divorce. For further consultation with Charlene about your specific financial needs, reach out to or 720-440-2873.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.


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