Important financial considerations can sometimes overlooked during a stressful divorce. Divorce can be a difficult process, so it isn't surprising that both parties may just want it to be over with as soon as possible. While many people going through this emotional process focus on the present, it can be easy to lose sight of the future, and this is especially true with retirement plans. Retirement, after all, may be a long way away for some, and when it comes to the division of marital property and asset valuation, it is often the family home that gets the attention.
However, retirement plans are arguably just as important, because a person going through a divorce is about to have only one source of income rather than two, at least for the time being. In essence, if a retirement plan isn't handled properly, the divorcee's age of retirement might be pushed back substantially. In order to avoid working late into life, 401(k)s, pensions, and other retirement plans should be given careful consideration.
During the divorce proceedings, the divorcing couple will be given the opportunity to settle and come to an agreement. If the couple cannot decide on a settlement, the judge will decide what to do with the assets. The Court will engage in an analysis known as "equitable distribution" where the judge will examine a wide variety of factors in determining a fair division of the marital property. For example, the courts often look at the length of the marriage, the ages of both spouses, and the income potential of the divorcing couple. After examining these factors, the judge will decide how the retirement plan is divided. Because equitable distribution can be more favorable to one party, it is usually wiser to negotiate and come to a settlement.
Unfortunately, it is often difficult for divorcing couples to come to a settlement, and that is why it can be beneficial to have an experienced attorney during this trying time. An experienced attorney can help the parties negotiate, so that their retirement plants are not ruined. If the divorcing couple cannot come to an agreement, an attorney can present persuasive arguments to the judge for the fair division of property, including any retirement accounts.
Source: Madison.com, "Can Divorce Destroy Your Retirement?," Wendy Connick, Oct. 13, 2017