A Michigan divorce can be emotionally difficult and financially challenging. This is especially true for those who are drawing closer to retirement. Many individuals in that position are worried about how property division issues in their divorce will impact their long-term retirement goals.
During a divorce proceeding, retirement savings accounts are usually divided in the same way that other assets are split. These include pensions, IRAs and 401(k)s. If this happens, a person may need to work part-time during retirement to make up for his or her lost retirement savings, or the individual may simply have to retire at a later age.
It is important to pay close attention to how assets are divided during the divorce. Any funds that come out of an account that is tax-deferred generally should be rolled over into yet another account so that withdrawal penalties and taxes can be avoided. Furthermore, it may be wise to change one’s retirement account beneficiary to another family member if one’s soon-to-be-ex was previously listed as the beneficiary.
Planning for retirement can naturally be stressful, and getting a Michigan divorce often complicates this process. Understanding laws regarding assets and property division can help in pursuing a favorable settlement. If the parties can work out their issues on their own through divorce negotiations or mediation, they can avoid getting a judge involved in deciding unresolved issues. This may increase their chances of walking away from the marriage with the assets they truly want. On the other hand, litigation is sometimes necessary when the parties are unable to come to an agreement.
Source: The Washington Post, “5 ways to keep a divorce from being needlessly expensive“, Jonnelle Marte, Oct. 31, 2014