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Divorces and retirement accounts

On Behalf of | Sep 13, 2016 | High Asset Divorce |

The National Center for Family & Marriage Research has reported that between 1990 and 2014, the rate of divorce for people over 50 years of age doubled. Over the same time period, the rate for those over the age of 65 tripled. Pennsylvania residents who are approaching retirement age and who are ending their marriages should be aware of how it can affect their retirement assets and what to do to protect them.

Older individuals who go through a divorce should look over the names of the beneficiaries of the retirement accounts as their preferences may have changed. They should also expect to have to divide any retirement assets that were acquired over the course of the marriage. So that both parties may receive a more equitable share of the retirement assets, each one should be divided rather than traded.

The value of a retirement account is largely dependent on the amount that remains after taxes have been deducted and is why retirement asset allocation should be based on post-tax values. For some forms of retirement, such as a Roth IRA, taxes are deducted from contributions and the withdrawals can be made tax-fee when certain requirements have been met. For a pension or a 401(k), the taxes are assessed when funds are withdrawn.

When negotiating a settlement agreement, one rule to adhere to is to not trade retirement assets for other types of assets, such as real estate. The long-term value of a retirement fund can be easily underestimated and maintaining certain real estate can take a toll on the recipient’s finances.

Older people who are divorcing should take care of how they handle their retirement assets. This can be a particularly complex aspect of property division, and a family law attorney can outline the alternatives to a client.