When a Texas couple decides to end their marriage, the divorce process entails a set of negotiations surrounding the division of marital property. This property includes real estate holdings, investment accounts and retirement savings, along with a wide range of other items and accounts. In general, the vast majority of what a couple has amassed during the course of their marriage must be divided between the spouses as part of their divorce. The manner in which these assets are divided can have a great deal of impact on each party’s ability to retire as he or she plans.
Older spouses must tread carefully when working through property division issues. Mistakes made during these negotiations can severely limit one’s ability to retire when and how they would like. In addition, care must be taken to make the best possible choices after the divorce is final. For example, one common mistake involves withdrawing large sums of money from retirement savings gained in a divorce.
While it is true that divorced individuals gain a one-time chance to withdraw from their retirement without incurring the 10 percent tax penalty, this course of action is almost never the most sound financial move. Retirement funding should be used for just that; to fund one’s retirement. Withdrawing from these savings in order to build a budget cushion or form an emergency fund is a recipe for disaster. In many cases, funds withdrawn from retirement after a divorce are spent, and do not end up supporting one’s retirement goals in any manner.
When working through these and other financial matters associated with a Texas divorce, it is important to gain a full understanding of the ramifications of each available choice. This is an area where a divorce attorney can assist, and can help a spouse determine their needs, then work out a negotiation strategy that can meet those goals. By going into the process with a clear outline of how one would like to emerge, it is easier to move through negotiations quickly and effectively.
Source: Forbes, 4 Divorce Mistakes That Can Derail Retirement, No author, Aug. 21, 2013