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Safeguarding retirement savings during a divorce

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Married couples planning for retirement in Michigan are likely counting on joint income and savings to support themselves later on. If a divorce occurs, this can greatly hinder one's retirement goals. In addition to losing the help of another spouse, retirement funds could be subject to division. However, there are some ways to protect retirement savings.

Dissolving a marriage is not always amicable, but it's in the best interests of both parties to work together to form a settlement agreement that each spouse is comfortable with. This is because divorce is so expensive. The average cost of divorce in 2016 was $15,000. Make it a priority to protect any joint savings by talking to a spouse about safeguarding these funds.

Before dividing assets, locate all retirement accounts first and calculate the money in each account. This involves looking at and tallying 401(k)s, pensions, IRAs, employer-sponsored accounts, CDs, real estate and money markets. Even accounts with equal amounts might be valued differently for equitable distribution during a divorce. For example, assets in Roth accounts are taxed upfront while 401(k) withdrawals are taxed.

Finances are often tight during and after a divorce, but one should not use retirement accounts to fund a split. When withdrawing before certain ages, taxes are incurred. Penalties are also applicable for withdrawals without authorization from a judge.

One or both parties in a divorce may have retirement accounts that they do not want disturbed. Accomplishing this, however, will likely require compromise and negotiation. This is especially true with high net worth divorces. Those who are going through such a separation may want to reach out to an attorney.

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