Attorney Matthew R. Arnold answering the question: “How can an attorney help me with my Divorce or Separation in North Carolina?”
We’ve discussed what’s known as the “gray divorce” trend several times before. Increasingly large numbers of people over the age of 50 have decided to file for divorce, many times more than in previous decades. While this can be a good thing for many couples, those facing divorce late in life face special challenges that young couples do not. Issues like retirement and building back up a comfortable nest egg can be more difficult for these older divorcees than for couples who split while in their 20s.
To help ease what can be a difficult transition for the over-50 individuals facing a divorce, the following are some tips compiled by a writer at Forbes for how to best minimize the financial damage divorce can do to your retirement.
First things first, the author says is to avoid the knee jerk reaction of most people to fight to keep the house. Most people wrongly assume that in a divorce it is better to end up with the home, something that is not necessarily true. Why? Well compared to retirement accounts, homes are far more likely to incur additional and ongoing expenses. Also, the future value of the home is questionable, especially given the recent crash in home values. Also, homes are not liquid assets meaning that people will have a more difficult time extracting value from the home to finance retirement.
Second, those facing divorce should be sure to understand the tax implications of a split on their retirement funds. Any withdrawal of funds from pre-tax accounts like 401(k)s or IRAs will trigger tax penalties. However, withdrawals from after-tax accounts like Roth IRAs are not taxed when the money is taken out during retirement. This means that if a divorcing couple has one 401(k) with a $500,000 balance and a Roth IRA with $500,000, the two are not equal due to the ways that each will be taxed, with the Roth IRA actually being more valuable.
Third, Forbes notes that there is an opportunity to make withdrawals from 401(k)s or 403(b)s without paying the normal 10 percent tax penalty. To do this, the funds must have been allocated to the other spouse in a qualified domestic relations order (QDRO). The expert says that if a spouse needs money to pay for divorce costs or get themselves on their feet, this is a good time to take a withdrawal and avoid the tax penalty. If you instead decide to roll the balance over into an IRA and are then forced to pull out money later you will be hit with the standard early withdrawal penalty of 10 percent.
Finally, though you may be ale to make a penalty-free withdrawal from your retirement account that does not mean that you should. Too many people take out more money than they need “just in case” something happens in the future. The problem with this is that taking out the money early often leads to overspending, depriving you of money you will very much depend on later in life. Experts say you should draw up detailed budgets and carefully determine how much money you actually have to have today and only withdrawal that amount, no more. After all, you’ll need that money to last you for potentially decades in retirement.
If you find yourself facing a complicated family matter then you need the help of experienced family law attorneys in Charlotte, North Carolina who can help guide you through the often confusing process of divorce.
About the Author:
Matthew Arnold is a Managing Member with Arnold & Smith, PLLC where he focuses his practice on most aspects of Family law: divorce, child custody, child support, alimony, and equitable distribution. Mr. Arnold is an experienced trial attorney who has tried jury and bench trials in both North Carolina District Court and North Carolina Superior Court.
Mr. Arnold grew up in Charlotte, graduating from Providence Senior High School and continued his education at Belmont Abbey College on a basketball scholarship. After graduating cum laude he attended law school at the University of North Carolina at Chapel Hill on a full academic scholarship. In his spare time, Mr. Arnold enjoys golfing and spending time on the North Carolina Coast with his wife and three young children: two daughters and one son.
“4 Divorce Mistakes That Can Derail Retirement,” by Marilyn Timbers, published at Forbes.com.
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