After working for several years to build a retirement account, ending a marriage could result in a significant loss of funds. There could be ways to reduce the impact of those losses during the divorce process. Utah couples who are concerned about making up for the loss of a portion of their retirement accounts might benefit from the information below.
First, even though it causes the reduction of your account, the parties need to carry out the provisions of their divorce settlements. In order to avoid costly tax ramifications when dividing an account, the parties more than likely secured a Qualified Domestic Relations Order from the court. With this order, the IRS will not impose the usual tax penalties associated with taking money out of an account. While dealing with any agreed to transfers, each party should also review the respective beneficiary designations and change them if needed.
From there, each party’s goals for retirement need to be reassessed. A review of the allocation of funds in the retirement account is more than likely needed. In order to make up for the losses, it might be necessary to increase certain investments and reduce others. How much risk each party takes often depends on one’s age and the amount of money needed to make up for the reduction in funds.
If a Utah resident fails to come out of the divorce with his or her retirement account intact, these next moves are crucial to getting back on the right track. On the upside, an individual might be planning for one now instead of two — at least until or unless there is another marriage. Prior to finalizing any divorce settlement, it would be advantageous to discuss how to structure the settlement and divide the marital assets in a way that still provides each party with the possibility of moving into the future with a view toward a comfortable retirement.
Source: Forbes, “5 Retirement Moves For Recently Divorced Couples“, Marilyn Timbers, April 27, 2017