Retirement Accounts Require Proper Valuation During Divorce

Older married couples are divorcing at an ever-increasing rate. And while it is often the wisest choice to end a relationship that is no longer working, those who are approaching retirement age face some very serious settlement decisions. The fact is, once you are in your 50s or 60s you will need to retain every possible financial benefit that you and your soon-to-be ex-spouse acquired over the years.

Retirement accounts, such as 401(k)s and IRAs can represent the most valuable assets divided in a divorce. But when assessing the value of these accounts, it is important to take their after-tax value. According to a financial planner, the value of these assets can vary greatly depending on whether the taxes are paid upfront or later.

For example, regular 401(k)s and IRAs are taxed when you withdraw money from them. On the other hand, Roth IRAs and Roth 401(k)s are taxed upon contributions and allow you to make tax-free withdrawals providing certain criteria are met. So you should make sure that the division of these accounts is based on their after-tax value.

Divorcing at a later age can have a number of complications, including figuring out the true value of your shared assets. It is absolutely vital that you fully understand the financial impact of every decision you make when dividing retirement accounts as well as real estate holdings and any other high-value assets.

Sitting down with an experienced high-asset divorce attorney could yield tremendous long-term benefits. The attorney could go over the value of every asset at stake and help you work out the details of the most favorable settlement terms possible.

Source: CNBC, “Memo to divorcing boomers: Watch your assets,” Jessica Dickler,” Sept. 9, 2016

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