The number of couples over 50 experiencing the JOY of DIVORCE Emancipation continues to rise. The biggest concern for many people of this age getting divorced is how will it affect any nest egg or retirement. Couples accruing assets during a marriage in a community property state like Texas will likely equally share in all marital assets unless there was a binding prenuptial agreement or fault in the breakup of the marriage. If the union was a long one, the number of marital assets could be substantial, which can seriously impact one’s retirement plans.
Regardless of the length of the marriage, spouses are advised to look after their financial interests before and during divorce so they can make sound financial decisions.
The circumstances of each divorce are different, but financial experts point out that spouses can often lessen the financial damage if they avoid the following:
Holding on to the house: Many think it is best to get the house because it will appreciate and may be paid for or have a manageable mortgage. However, houses can be expensive to maintain and often have unexpected expenses. Getting a large share of the IRA or 401(k) may make more fiscal sense.
Ignoring the tax burdens of retirement funds: A knowledgeable attorney will be aware of this issue, but spouses need to remember that pulling money out of retirement accounts early can add a hefty tax burden. There are, on the other hand, other tax-savings vehicles like a Roth IRA where withdrawals are not taxed.
Rolling the retirement account into an IRA immediately: There is a one-time-only opportunity for those under 59 ½ to withdraw money without paying a 10% tax penalty. The only caveat is that these assets must be transferred pursuant to a qualified domestic relations order.
Taking too much out of retirement accounts:It is good to keep money in the bank, but some will take more than they need because of the one-time opportunity to avoid that 10% penalty.
Getting help may also be necessary
An experienced Board-Certified Family Law expert who works in Collin County, Dallas County, Denton County, or elsewhere in Texas can be an invaluable asset to a spouse going through a divorce. They can help ensure that all assets are accounted for, are properly characterized and appraised help protect an individual’s premarital assets, and help determine fair agreements involving spousal support and a just and right division of the community estate.