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
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
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
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.