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The impact divorce may have on retirement accounts

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The divorce rate has doubled among those 50 or older in Michigan and elsewhere since 1990. At that time, the divorce rate among that age group was five per every 1,000 marriages. In 2015, that rate had doubled to 10 divorces for every 1,000 marriages. The divorce rate for those who are 65 and older has tripled since 1990 with six divorces for every 1,000 marriages in 2015.

Older couples may choose to get divorced because they become different people after raising children. They may realize that they have nothing in common and have no reason to stay together. However, getting divorced at a later age could have consequences for both spouses as it relates to their retirement. For example, if money inside of an IRA is to be transferred, it must be done after the divorce is final. Otherwise, a withdrawal could be subject to taxes and penalties.

It must also be noted in the divorce decree that an IRA transfer is a result of the divorce. When transferring money in any other retirement account, a QDRO must first be obtained. It may be necessary to find an attorney who has experience with these matters to ensure that it is written properly. If it is not, a transfer could be considered a taxable withdrawal.

There are many ways a couple may choose to divide assets such as a retirement account in a divorce. In some cases, a prenuptial agreement may already dictate what is to be divided and how. It may also be possible to create a property division agreement privately either with or without the help of an attorney. If necessary, a judge may create an order that specifies how marital property is to be split between two spouses at the end of a marriage.

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