Staying on track for retirement following a divorce
As people get older, they must make difficult decisions about the rest of their life. For many people, this includes deciding whether the person they are married to is the person with whom they will spend the rest of their life. For more and more people, the answer to that question is no. In fact, from 1990 to 2010, the number of couples over age 50 who choose to seek a divorce doubled. While some in Texas may worry about how a divorce that comes later in life will impact their retirement plans, there are certain measures that can help keep a person on track.
One of the first actions that can help a person stay on track is to reduce their housing costs. If $500 can be saved each month and reinvested for a 5 percent return for a period of time, he or she will have $77,000 more to use for retirement. At this age and after a divorce, many people are ready to downsize. As a result, selling the family home and splitting the money with the former spouse may be a viable — and financially prudent — option.
Additionally, examine the overall value of an asset during discussions regarding distribution. For example, a 401(k) worth $500,000 that has withdrawals taxed at 100 percent has less value than a similarly valued account where only the gains are taxed. Also, once the decision has been made on how to divide a retirement account, it is important to ensure that the asset is received. For example, a person receiving a portion of his or her spouse’s retirement account has no authority over how it is invested until it has actually been transferred.
There are many people in Texas in a relationship that no longer works for them. Some may have concerns about how their decision regarding whether to stay in an unhappy marriage will impact them financially. For many, these concerns could prevent them from pursuing action that would ensure their happiness. However, there are many strategies that can help a person manage the division of assets required by a divorce in a way that will allow them to stay on track in regard to their retirement and other plans.
Source: Time, “Don’t Let Divorce Derail Your Retirement“, Carla Fried, March 3, 2016