Latest / The Jon Sanchez Show / Understanding QDRO’s and their impact on your retirement
Transcript
- Jon G. Sanchez, CEO: Good Monday afternoon to you. Welcome to the Jon Sanchez Show on Newstalk 780 KOH. It's a pleasure to be with you. Sorry for the technical difficulty. I absolutely to get that resolved. Don't want to be without you today. What a day, what a day, what a day it was. You you find a situation where you never know what the street is going to do. Saturday, the in a panic. The president comes out and says, OK, listen, here's the situation. Iran, you've got 48 hours, meaning by five o'clock tonight, Monday night, to open the Strait of Hormuz. If you don't, are going to bomb and destroy power plants, ⁓ so on and so forth. Critical infrastructure, buildings and structures throughout Iran. So this morning, at roughly, little after four o'clock, He changes his mind. And he comes out and he does a press conference, me, ⁓ of all he did a true social post, and essentially said, it, we've been in talks with Iran over the weekend, talks are going great, and therefore I'm gonna give Iran another five days, because the are going great, and essentially we think we're gonna have this thing resolved. As you would imagine, the global markets, because you still had European markets are deteriorating, Asian markets were closed. But the global markets, as well as our pre-market session, just went, what did we just hear? I mean, it was the most crazy thing that I've ever seen in my life. An immediate abrupt turnaround. We were down over 300, about 340 points on the futures at that point. and then all of a sudden we find ourselves up nearly 1,200 points, literally in the blink of an eye. I you wanna see a prime example of algorithmic trading? There it is. Here is the true social post the president released this morning. pleased to report that the United States of America and the country of Iran have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East. Based on the tenure and tone of these in-depth, detailed and constructive conversations, which will continue throughout the week, I've instructed the Department of War to postpone any and all military strikes against Iranian power plants energy infrastructures for a five-day period subject to the success of the ongoing meetings and discussion. So that was a true social post that took us from down over 300 to up over 1,000, literally in a blink of an eye in the pre-market session. Then he leaves Mar-a-Lago, he's on the tarmac, and he does a really long press briefing. And I mean the press was this throwing one question after the other at him. He said at that press briefing that both Iran and the US wish to make a deal and that the two countries are gonna get together today probably by phone. And then he went off and said, well it has to be by phone because most of their infrastructure's ⁓ meaning internet, et cetera, is already gone and so on and so forth. So you sit back and you go, a minute here. Does it really end that quick? Can it end that quick? Now, within moments of that Truth Social post, Iran came out through their news agency and said, essentially, and I'm paraphrasing, we don't know what he's talking about. basically denied the entire thing. But you know what was interesting? Wall Street didn't care about what Iran said. Wall Street cared about what our president said. And so, this phase, the market, of course, is so for any type of good news. And at least on the surface, this is the best news that we can expect. So we find ourselves in a situation where, who do you believe? Is this just another negotiating tactic? Is this really something that's happened? This is what everybody from an institutional standpoint is looking at right now and going, wait a minute here, this really be happening? And we've got 5,000 Marines on their way there. We had talk of course of so many different things, Carg Island being taken over by us. I mean so many different things. But all of a sudden talks occur over the weekend, and they're gonna continue over through the week, and then this whole thing's gonna be over. I'm gonna throw out an S word to you. I'm skeptical. I'm skeptical that it can turn around that quick. Now wars do come to an abrupt end, we know that. And we hope and pray that everything President Trump told us today is true. My fear, is he may have the very best intentions, but you've got a country that has lost over 3,000 people. that is in desperate need of oil to start flowing again, which would give them an incentive to open strait. We don't know who's in charge in Iran. The president said he doesn't really even know that Kirchner and one other guy were the ones doing all the negotiations over the weekend. He said it's not the Ayatollah's son. He goes, we don't know where he is. So really we find ourselves in a situation where, okay, it sounds really good on the surface, but could it end that quickly? That's what I'm skeptical about. I'll share with you when we come back from the break what this market did. Didn't close anywhere near the highs, but it was a solid day today. Oil prices plummeted, which was a great thing. But we have to ask ourselves, can it really end ⁓ quick? Let's hope so. Let's turn it over to Kristin Snow. She's in the Right Now Traffic Center. Hello, Kristin. Welcome back to the Jon Sanchez Show and News Talk which big rally in the market today. know, again, shocking rally. If you just joined us, once again, what happened is early this morning, the president posted on True Social that talks Iran over the weekend went great. Talks are expected to continue throughout the rest of this week and therefore he postponing what was supposed to happen by five o'clock tonight, which was the destruction of infrastructures Iran. So he's given them five days to basically come to the table and see what happens. Let me tell you, I'm not the only one that's skeptical because I I'm gonna give full credit to, there's a Bloomberg article and I wanna give credit to this gentleman that said this. Let me find name once again. Brad Conger, he's chief officer at Hurdle Callahan. I've never heard of them. But I think he summarized the best. He goes, the people who are encouraged by Trump's responsiveness to the market, Their faith is misplaced. said, I'm worried that it's not Trump's decision anymore. Not in the same way that the tariffs could be called off. And that's exactly what I'm talking about as far as I'm on this situation. I hate to say this. Lord knows want this market to calm down and oil prices to down and lives ⁓ stop being lost so on and so forth. you get to think yourselves for just a moment and go, what? What are we gonna give Iran for them to stop firing missiles and drones and everything else? What are we gonna give to Iran to allow them, quote, to open the Strait of Hormuz, meaning they're not gonna fire missiles and mines and so on and so forth? That's where I'm struggling. Trying to figure this out and go, okay, what's in it for Iran, right? A large portion of their country has been destroyed. They've missed out on billions and billions of dollars of oil sales. That right there is the only thing that I can think would be the incentive for Iran. And that is to be able to get the oil flowing again, which of course is a massive incentive. But I've seen these situations before. And I remember when I was younger, a younger broker, I'd get really excited about these and believe everything that I read and heard and watched and so on and so forth. Well, tomorrow I'm gonna be 62 years old and I think I'm a little bit wiser than I was earlier in my life as it is with many of you. So I guess what I'm saying is be careful. If you had been on a kind of a defensive stance, don't feel like the world is leaving you. Don't get FOMO, fear of missing out. This is a time where cooler heads will prevail. And again, I hope and pray as I know many of you do, this thing does come to an end. because some are skeptical saying the president did this, that the talks really didn't happen with Iran, just to calm the markets down. Because I told you on Friday, I said, my guess is, and my bet is, that we were gonna see $100 oil within the next couple days, meaning Monday and Tuesday. And we actually did, we touched it very briefly. And that's why the equity markets were plummeting over 300 points, until everything turned around. So I think the president and his were saying, Mr. President, something needs to be done. Something needs to come out of your mouth to calm these markets down. Because man, they had a big sell-off in the Asian markets, they had a big sell-off in the European markets before all this happened. And again, we were heading that way. But how did we finish when it was all said and done? Well, again, we roughly gave up about half of the gains that we got right at the beginning, which you even count that, because again, these algorithms just kicked in. ⁓ so rapidly. But it was a solid day finished up 631 on the Dow 1.38 % to a close of 46,208. Nasdaq rose 299 1.38 % to close at 21,946. S &P was up 75 points 1.15 % closing there at 6,581. And the Russell 2000 was the best performer it's always the most volatile on the up and the downside. Today it was up 2.29 % 56 point gain to a level of 2,494. Now the ever so important question, oil. How did it do? It tanked. No pun intended. $9.93 loss, $88.19 a barrel. Gold prices, they fell. Gold fell $167.16, closing at $4,407.20 an ounce. And I'll tell you what was interesting. We saw bond yields come down today. Now why is that interesting? again, the bond market has not been behaving, as I've said many times on this show over the last few weeks. Bond market's not been behaving like there's a war on. Normally you would see bond prices go up, yields go down. Up until today, we've seen the opposite happen. Bond prices go down because ⁓ traders want to hold the bonds, fear of rising inflation because of oil. Today they hmm, you know what? Let's start buying those bonds again. Because now, oil's going to come back on board and we're not going to be at a war and on and on and on. And so they bought the bonds and that drove the yield down. So the 10-year yield today was down six basis points to a yield of 4.33%. So that was a good solid number. Good solid number there. Now, as you would imagine, I remember this morning I said on one of my stock updates, said today was a pretty easy trade from the standpoint. Everything that sold off when this war started that first Monday after the Saturday when the missiles began flying. Seemed like everything that sold off as far as the sectors and even some of the individual names when they sold off, those are the names that came back today. Let's go to the cruise lines. Norwegian Cruise Line up 6.23%, $1.18 rise to 2013. You had airline stocks that were strong today. You had Tesla up $12.87, 3.5%. Palantir up $10.22. Micron didn't participate. The semis did not do much today. Micron was down about $18.55, 4.39 % loss. to a price of 404.35. Again, airline strong, transportation strong, everything of course with the oil coming down. That's how important oil is to this global economy. Now, where does this bring us on a year to date basis? Now, I bring you up to date on this one. So for the year after today's gains, we're down 3.9 % for the year on the Dow, NASDAQ's down 3.9%, the Russell 2000 went positive up a half a percent, and the NASDAQ is down 5.6%. So once again, we still have some damage done. As I indicated on the show on Friday, if you missed it, please pick up the podcast or the YouTube. been some damage done, right? We closed below the 200-day moving average on Friday. And again, major averages on a year-to-day basis, not doing too well. Matter of fact, as I went through the numbers, we were sitting between 7 % to high 7 % pullback range from our 52-week highs on the averages. And remember, on Friday also, the Russell 2000 went into correction territory. It was down 10 % from its high. we needed this. The bottom line, we really, really needed this today ⁓ calm things down a little bit. I love one other comment I want to mention ⁓ by a at Mizuho He says, the hardest part is not predicting the war, but predicting the communication from the White House and how much markets will react to it. He sent in a note to clients. He says, we're left a market confused whether it's a credible sign of the end game nearing or another very complete very much moment. Truth is about perception and Trump's back and forth is creating uncertainty on top of uncertainty, which helps prevent market declines from otherwise confident bearers, according to a strategist at Piper Sandler. of this back and forth buys time and prevents overconfidence in the markets for better or worse. All right, now up to date on this crazy, crazy session. This is like something we don't really see on a Friday, but nope, it was a Monday. That's how our week's gonna start. When I come I'm get down to my topic of the day. ⁓ You know, in the world of gray divorce, we've all heard that term, the gray divorce. Matter of fact, it's on the rise. It has been for quite some time, and don't see ⁓ why would change. So ⁓ this, today's topic is really going to apply to a lot of you that are listening. So very documents as critical as qualified domestic relation order, better known as the quadro. While the divorce decree officially ends the marriage, it is the quadro that actually moves the money. today, I don't like talking about this topic of divorce, but again, over 50 % of marriages end in a divorce, so it's something many of you have dealt with or may deal with in the future. I go into, I haven't touched on this, and I don't think I've ever gone specifically, on the quadro and the impact on your retirement. Because we deal with this a lot with our clients, right? They get a divorce, everything's fine as far as retirement, they get the divorce, the quadro steps in, the quadro goes, hey, guess what? You just lost that half a million dollar or whatever the case is, to your spouse. And it's all done under a quadro. So it's gonna be really interesting. So today I'm gonna focus on understanding the quadro and the impact on your retirement when I come back. Let's turn it over to Jim Poston. He's got news, traffic, and weather. Hello, Jimmy. Jon Sanchez showing his talk 780 k which what a wild wild right it was on the street today once again we finished fairly decently up 631 on the Dow 1.38 percent nasdaq rose 299 1.38 percent also smp up 75 points about a 1.15 percent increase as i indicated during the first segment of the show it's all about the president coming out and saying all right we're not going to go after the infrastructure of iran for five days so it takes us to about Friday or Saturday, depend upon whatever calendar he's gonna utilize. So the street got excited about it. Again, the big move, besides equity market, oil down $9.93 to 88.19. All right, so you're up to date on the market. Now let's get to our topic. Understanding quadros, again, the qualified domestic relation order that occurs when you get a divorce. Now why am I focusing on this? I hate the subject of divorce, but I see this very often with clients. And you talk about a way to derail your retirement plans, right? You could have done everything correctly, saved and kept low debt exposure, did everything correctly. And then here comes the divorce papers and you're wiped out of your retirement or at least 50 % in most cases, sometimes all, I've seen it all happen. And there's a lot of confusion of what the Quadro does and some of the rules that we have to follow because we get... You know not served but we're shown or told the the quadra order by the judge and we have to of course adhere to that So I found that a lot of people just have no idea how these things really work So I want to take this opportunity kind of kind of you educate you a little bit on it So I'm gonna kind of focus in because I'm talking about you know losing big chunks of money in retirement that's generally for those of you that are probably 50 or older that have saved for many many years in your 401k and IRAs and so on and so forth. Now the IRA is not affected by the quadro. really affects your retirement plan at work. But got a little stat for you. So I don't know if you know this or not. About one in three divorces in the US now involve people age 50 or older. Pretty substantial. That's according to Wikipedia, so I'll take that for what it's worth. But I've seen that stat everywhere else. That was just the ⁓ fastest that I could find. But here's other one that's interesting. For second marriages, the failure rate is 60 % plus. And we've seen it, maybe some of you have done this, married two, married three times. So again, very difficult to save for retirement when you're losing money in a divorce. So what I wanna kind of focus on once again is really what is this all about and how can we make it and still save for our retirement if divorce is something that's gonna happen? So the quadro, as I like to say, is really the only document that is standing between a comfortable retirement, which you had probably before the divorce, and a major financial setback. And what it does, of course, is it ensures that, hey, look, in a state like Nevada, a joint tenant state, he's gonna get half, she's gonna get half. That's the way it works. But you gotta be very, very careful. very careful of how this money is distributed. So wanna start off with, for those that are not familiar with the term, what exactly is a Quadro? So once again, a Quadro, that acronym stands for Qualified Domestic Relation Order. It's an actual court order to divide the qualified employer-sponsored retirement plans. So when I say that, I'm talking about your 401K, sharing, pensions, I mean, ⁓ you name it, that is basically through employer-sponsored. type of retirement plans, most likely it's going to be and affected by the Quadro. So the Quadro ensures the division complies with the federal ERISA laws. Now, what in the heck is ERISA? So are ⁓ the the rules that we in the industry have to adhere to. And employers have to adhere to it if they offer a retirement plan. And ERISA stands for Employee Retirement Income Securities Act. Those are regulations that protect both parties. from an early withdrawal penalty and tax consequences. So in life, before I get into some very ⁓ nitty specifics with you, so in real life what ends up happening, the divorce decree is again both or now ex-spouses, and their attorneys have agreed to as far as the entire divorce. It's basically the contract the divorce. You're gonna get this, you're gonna get that, so on and so forth. the kids, mean everything is thrown in the divorce decree. you can't come to my office, if we have a 401k that we're managing, you can't come to my office and say, here's my divorce decree, you gotta transfer or give my wife 50%. And trust me, I'm saying kind of jokingly, I've had clients do that, they don't know, that's why I wanted to this topic. When we do have to adhere to it is when we have a quadro that is actually signed by the judge. I got done going through a ⁓ real mess with a client. guess it was about three months ago, long time client. mean, 25 year client. And got a divorce, but the somehow, some way delayed. And so 20 ⁓ years later, the comes back and goes, you remember that Texaco 401k you had worth, know, and some odd thousand dollars when we got divorced? Well, it's now worth, you know, 800,000 roughly. And I want half of the 800,000, not half of the 400,000. So they ended up going back to court. They got the quadro, because I should mention this, the first quadro, I think it was her attorney screwed up and didn't get the judge's signature. And I'm like, I have never seen this happen. know, eyes are dotted and T's are crossed because in most cases it's a lot of money. But her attorney screwed up, didn't do it. came back again 20 plus years later and said, ⁓ we now have the judge's signature, hand over the money. And I won't bore you with all the details, it was an absolute mess. that divorce decree is going to say how the assets that fall under the ruling the quadro are dispersed. So just keep that in mind, you got two major documents in a divorce, the divorce decree and then the quadro. So the decree again says you are entitled to half of the account, half of the assets. Again, it gets into child support, everything there. A plan administrator, so whether it's, let's say it's a 401k you're talking about, right? So pick a fidelity vanguard, it doesn't matter who it is, the big boys. They will not distribute those assets, even though the divorce decree says, Sally is entitled, based the divorce decree, to get 50 % of Frank's half a million dollar IRA. They go, nope, sorry. Can't do that. Show us the quadro. What's the quadro? Again, I've seen attorneys forget to get the quadro. if going through divorce or you're go through divorce, absolutely essential, the quadro is there and signed by the judge. Again, got a lot of quadros over my career and they weren't signed by the judge. The attorney just got them, drafted them, ⁓ both signed and they never gave it to the judge. Again, the financial cannot do anything with that quadro unless it's signed by the judge. So again, what quadro does, The plan administrator, again, can't disperse the money without the Quadro. It serves as the key to unlocking the employer-sponsored retirement funds. sole purpose, entirety, sole purpose, is to tell the plan administrator, the retirement plan administrator, on dividing a pension, 401K, cetera, between the two former spouses. Now, remember, a Quadro can cover more than one retirement account. It can assign rights to retirement benefits under more than one retirement plan. of the same different employers. As such, each plan and the assignment of benefit rights are clearly specified. So what I'm saying here is you can have a 401k, you could have a profit sharing, you could have all these different elements of a sophisticated cash balance plan, pretty retirement plans if you're with an that offers those. That quadro has to start talking about and every one of those. I've seen that mistake where the quadro will only address the 401k But in the divorce decree, it says you gotta split the 401K, you gotta split the cash balance plan, is like a pension plan, so on and so forth. So you gotta be very careful about that. Now, are the type of retirement plans that the Quadros cover. So the defined contribution plan, right? So once again, that's your 401K, your 403B. ⁓ We see many of these anymore. The SARCEPS, the SEP IRA plans, simple IRAs. It covers the pensions, what we call defined benefit plans that provide a monthly income, i.e. a pension. And then, as I said, the profit sharing, the employer-sponsored sharing schemes. when I come back, I want to bring something up that I see as real common mistake, and that is people try to use a Quadro to disperse, or tell us to disperse, 50 % of the IRA. They're not used for that, so I want to share that with you when we come back. Let's wrap it up with Kristen Snow. ⁓ is in the Right Now Traffic Center. Hello, Kristen. Welcome back to the Jon Sanchez Show on News Talk 780K, which talking about a tough subject, but something that of you need to be aware of, and that is understanding a quadra, a domestic relations order. This is again, how your are distributed under law after a divorce. Okay, very important, a lot of rules that are there. Now, another area that want to inform everybody about is the IRA. Again, had clients come to us with The Quadro, which again is designed 100 % for employer sponsor plans, they come to us and say, at, know, my ex gets 50 % of my IRA, here's the Quadro. And that is not what a Quadro is for. We cannot process a transfer under a Quadro. That's where many times the divorce decree will be used or we call it transfer incident to divorce, which is again, just another legal form that says, right, the IRA with Sanchez-Gantt, know, 50 % belongs to Sally. You know, she's by law entitled to this money. And then we talk to Sally and say, what do you want to do? Do you want to, you want us to open up another IRA, et cetera? So that's the difference. So just remember, Quadro is only for your employer sponsored plans. It is not for your IRA accounts. Very important, again, a very, very common mistake. Here's the other issue. I want to kind of wrap things up since I'm running out of time very quickly. And that is really getting into some of the tax traps and things that are there. But first, I do that, I want to educate you a little bit on why the quadros are vital in divorces. So once again, call this the gray divorce, right? Because you're usually over 50, you're in your peak earning years, you're 401K. or similar type of retirement plan is usually your biggest asset your home. So a lot of things to know. Now, why they vital? Number one, protection of survivor benefits, right? For older couples, pension, for example, may be the primary source of future income. ⁓ I see this lot with first responders, right? They get to retire pretty and then they end up divorced. And, know, it, mean. Many of them, of course, can retire 50 to 55 with very, very substantial Well, again, the quadro is very important because there's lot of years that that pinch of money is going to be paid out. And again, if the spouse is not the right divorce attorney, the right documents, they can lose out on that survivor benefit Now, the tax This is where it's really interesting. People always think, OK, here's the quadro. I need to split my IRA. My ex is going to get it. Is she gonna get hit or am I gonna get hit with the 10 % penalty because we're both under 59 and a half? And the answer is absolutely no. And that's one of the few things, one of the few times that we can take money out of an IRA account for a client that's less than 59 and a half and not subject the account or the client to a 10 % penalty because they're under 59 and a half. How do we do that? It's the quadro, right? So if the funds are distributed via the quadro order, that 10 % penalty is waived by the IRS. Another reason the Quadra is important, the catch-up potential, right? Again, 55, 60 years old, again, the green side of things, people reach their peak earning years in many cases, that Quadra is gonna ensure that the non-earning spouse receives their fair share of the growth that's happened over decades of the marriage. Or, like I said, the story with one of our clients, divorce happened 20 years ago, Quadra was done 20 years ago. It was never implemented and was a $400,000 old 401k turned into about an plus 401k. So here's pitfalls I wanna kinda leave you with very quickly. And that is delaying the filing. So if the employee's ⁓ retires or dies the quadro is finalized, that non-employee spouse may lose their rights to the benefits forever. Forever. The language, well, you gotta watch that also. Bottom line. Have a great attorney, you won't have to worry about this, and a great financial advisor will take care of it all for you. God bless, have a great afternoon, we'll see you tomorrow on the Jon Sanchez Show.