As more and more people divorce during mid-life, more and more people are facing increased apprehension about their retirement. According to an ING U.S. study, it was found that divorcees had $11,000 less in retirement than the average married couple. Women are afraid that they will not be able to retire after a divorce. According to the study, women end up with $34,000 less for retirement than men have after a divorce. As for men who divorce later in life, they fear that they will have to put off retirement for years because they will be down to one income and have to pay alimony.
Divorce does not have to put your retirement plans on hold though, nor does it have to diminish you original plans either. According to Forbes.com, there are steps you can take to avoid having a divorce hit your retirement plan hard.
First off, it is not always best to end up with the house instead of additional funds. It may not be worth it to fight for a house that will change in value over the years and will be a costly asset. If you are concerned about being ready for retirement, then sometimes it is better to have more money put aside in a 401(k) or IRA. A diversified savings account can also be better than a house.
You also need to remember how your retirement accounts will be taxed. Your 401(k), 403(b), or IRA are all pre-tax accounts. These will be taxed at the time you withdraw funds for your retirement. This is unlike savings such as Roth IRAs. You will not be taxed upon withdrawal. So what if a 401 (k) and a Roth IRA are both up for grabs in a divorce? If the same amount of money is in each, the Roth IRA will still end up being worth more because there will be no tax waiting on it.
If you need to take funds out of your retirement savings to pay divorce-related costs, then you need to understand how to avoid tax penalties. If you are younger than 59 and half years old, then you may be able to avoid the 10 percent tax penalty on an ex-spouse's 401(k) or 403(b) for one withdrawal. This is true if and only if you have a QDRO (qualified domestic relations order). Such a withdrawal is better than rolling the money over into an IRA, and then later taking money out for a divorce. At that point, you will get hit by the 10 percent penalty.
That being said, you do not want to deplete your retirement funds when you escape the tax penalty. Only take out enough to pay off current costs, realizing that you will need to keep as much in savings as possible. Figure out how much you would need to live off of your retirement funds for a couple of decades. When you have a number, this may keep you from taking out too much from your retirement.
Get outstanding professional help you each step of the way. This can be a trying time in your life, but you have to make sure that you are making the right decisions so that you can move forward in life with undimmed prospects.
When you have any issues with the division of assets and debts in a divorce, be certain to
contact a Long Island divorce attorney. We at the Meyers Law Group are well-versed in your rights and what it takes to prepare for the future. Get help from an experienced divorce lawyer today! Call to schedule your consultation.