Colorado residents are more likely to divorce at older ages than they ever did before. Seeing that women are more financially independent than in the past, this trend should not be surprising. (But even with this new independence, women still on average have $34,000 less following a divorce in retirement savings then do men.)
However, what can surprise couples are the unpleasant tax and financial consequences that can come along with a divorce. This is especially true when it comes to planning for retirement. When it comes to retirement couples contemplating divorce need to be particularly careful as to property division matters.
Couples often put off divorce out of fear that retirement savings could end up being depleted. However, there are means to reduce the amount of financial harm that can come about due to a divorce for those approaching retirement years.
- Couples should not necessarily put their focus upon the house over other financial assets. Though we hope that the house will continue to grow in value, upkeep of the home can be expensive.
- The ignoring of tax consequences when making withdrawals from retirement accounts need to be considered.
- The financial consequences and penalties of rolling a spouse's retirement account into an IRA need to be considered.
- The temptation of dipping into retirement savings with or without penalties still needs to be considered.
Couples need qualified and unbiased financial advice when contemplating a divorce. Though there are many so-called financial planners willing to help out, they often receive a commission for steering individuals towards particular products or plans. And though CPAs often understand the tax implications of certain actions, these individuals are not qualified to provide legal advice unless they also are licensed attorneys in the particular state where the client lives.
Forbes, "4 Divorce Mistakes That Can Derail Retirement," Marilyn Timbers, Aug. 21, 2013