Retirement Accounts in Divorce
Divorce among the baby boomer generation is more common now than ever before. According to the National Center for Family and Marriage Research, divorces among married couples 50 and over doubled from 1990 to 2014. Over the same period, divorces among couples 65 and older tripled. Divorce among older couples has unique challenges. One important issue that older divorcees face is divvying up retirement accounts. Older Americans have a smaller window to earn after they divorce, so retirement accounts are a commonly fought over topic.
How Are Retirement Investments Divided?
Regardless of who saved more, retirement accounts are often split evenly, or close to it, when a couple divorces. Attorneys say that in a large majority of divorce cases, retirement accounts are considered marital property, and funds that were saved up to support one household must be divided to support two individuals. “There are a number of people who say ‘I have socked away every month and I do not see why I have to divide it with my spouse,” says Joslin Davis, former president of the American Academy of Matrimonial Lawyers. “The law says ‘too bad.’”
When divorcing, regardless of age, it is important to also check on the beneficiaries in place on retirement accounts. Attorneys suggest reviewing beneficiaries after any major life change to ensure they reflect the wishes of the account holder.
With the variety of retirement accounts available today, it is important to keep in mind any potential tax implications the accounts may have. For example, most retirement accounts, IRAs and 401(k)s for example, are set up to allow the holder to contribute tax free, and pay taxes when they withdraw the funds during retirement. A Roth IRA or a Roth 401(k), however, each require taxes to be paid when contributing to the account, but the funds can be withdrawn tax-free during retirement. Because of these different tax impacts, the types of accounts being divided and who ends up receiving them can make a big difference in the accounts’ overall value. Attorneys suggest dividing retirement accounts based on their after-tax value.
Be Careful If Considering the House
In most cases, it is best to hold on to retirement accounts rather than trading them for other high value assets. Many divorcees, especially women, fight for their home in exchange for retirement assets, but this is often a bad choice. Homes are expensive to keep up and can depreciate, so for older individuals with less time to earn after divorce, fighting for retirement accounts may be more beneficial.
Kane County Divorce Attorneys
Each divorce case is unique. If you are considering divorce and are close to retirement, it is important that you have an experienced Geneva divorce attorney at your side. At The Law Offices of Douglas B. Warlick & Associates, we have years of experience representing our clients and fighting for their best interests. Call 630-232-9700 to schedule a confidential consultation with us today to review your case.