Recent studies found that more and more people in their 50s are getting divorced here in Worcester, Massachusetts. The trend in more mature people divorcing is an indication of the changing dynamics of modern American families and the relative ease of filing for a divorce.
But one of the problems faced by many when they end their relationship in midlife is the financial impact it may have on their retirement. Women fear not being able to afford to retire, while men are afraid they will have to delay their retirement date by a few more years.
According to a recent study by an international financial institution, divorced women have $34,000 less retirement savings than their male counterparts. Men, on the other hand, are more concerned about the alimony payments and other household expenses that they have to share with their ex-spouses. To avoid the possible financial pitfalls, there are a few common mistakes when it comes to divorce property division that should be avoided.
One of these pitfalls is the marital home. Experts advise against choosing the house right away over financial assets. Experts know that a home is more likely to incur ongoing expenses. Also, a house’s market value may increase or decrease, depending on various factors beyond a person’s control. Experts recommend evaluating who will keep the home, based on appreciation value and other tax consequences.
As for retirement accounts, experts recommend taking note of possible tax implications. They also advise against withdrawing too much money from retirement savings, as that move may have long-term implications, including taxes and other withdrawal penalties.
Divorce is a complex process and this is especially true for those close to retirement. It is best to assess one’s current finances and determine how they will work with future budgets. The right advice can result in an equitable division of property and a happy retirement after the divorce.
Source: Forbes,” 4 Divorce Mistakes That Can Derail Retirement,” Marilyn Timbers, Aug. 21, 2013
