Don’t Let Divorce Hurt Your Retirement
A recent study by the ING U.S. Retirement Research Institute looked at the effect divorce has on individuals feeling financially prepared for retirement. The negative effects are, in part, due to mistakes people make while still married and subsequently during a divorce that may have an effect on their retirement funds, especially for women.
The study found that only 45 percent of divorced individuals felt prepared for their retirement compared to 54 percent of married persons. It also found that those who were married (or living as married) independently saved $40,000 more on average for their retirement compared to singles.
The disparity is even greater for women. Women who were divorced had $34,000 less in total retirement savings than men. This is especially troubling considering women on average live longer than men.
Preparing for Retirement
What does this mean? It means individuals must take two careful approaches when preparing for retirement. First, regardless of marital status, you must make a full commitment to saving for retirement and develop a plan that is in line with your needs and goals. Proactively meet with a financial advisor and focus on what you need to do in order to live comfortably 50 to 60 years later.
The second approach is where an experienced divorce lawyer will be helpful. During the process of a divorce, it is imperative you make the right decisions so as to minimize damage to your retirement assets. Importantly, be careful in selecting which financial assets you choose in the divorce. While it may seem tempting to keep the house, it must be carefully weighed against the possibility of keeping the retirement funds. Those funds will appreciate in value and will finance your retirement in a steadier manner than a house. A house can lead to unexpected and all-consuming expenses.
If you chose the retirement funds, you do not have to roll your soon-to-be ex’s retirement account into an IRA right away. Instead, the law allows for a one-time chance for divorcing partners under the age of 59.5 years old to withdraw money from their ex-spouse’s 401(k) without having to pay the standard tax penalty. As many divorcing parties have to use their retirement funds to pay for divorce expenses, a withdrawal may save more money than rolling the ex’s account directly into an IRA.
Make Sure to Contact an Attorney
Divorce is a stressful and complicated process without the added worry of whether you will face a savings shortfall once you are retired. An experienced divorce attorney can walk you through the process and ensure you make the right decisions during the divorce proceedings. Contact a skilled DuPage County divorce lawyer today.