Divorce Can Impact Retirement

weddingringsThe challenges of a divorce vary greatly depending on the individual couple, the number of years they’ve been married, whether they had children, what assets they share and what stage of life they’re in.

For example, Castle Rock divorce lawyers know that a younger couple with children may have custody and support issues take center stage.

For older couples nearing retirement, asset division is crucial because there is less time to start over financially.

Understanding how a divorce may impact your savings, your taxes and your future will help you make better informed decisions about what things may be worth a fight, and which might be better to let go.

If you are older than 50 and planning a divorce, the first thing you need to do is go over with your attorney the employment retirement plans. What you’re looking for is some idea of what those plans say about your 401(k) and your pension.

With Colorado being an equitable distribution state, there is no automatic assumption of a 50/50 split, but it’s likely you may be entitled to a portion of your soon-to-be-ex’s retirement plan. This is where it becomes critical to have an attorney familiar with these issues because you need someone who understands whether it’s wiser to go after a larger chunk of the 401(k) or the house or both or neither. It will depend on your individual circumstances.

If you’re the one holding the IRA or 401(k), it’s important that your attorney ensure you’re protected. For example, let’s say you have a retirement account that’s worth $600,000 when you reach an agreement. You agree to divide it in terms of dollars, so you are going to owe your ex $300,000 by the time you retire. But then let’s say the value of that account dwindles to $400,000 by the time you are ready to withdraw it. You will still be obligated to pay that $300,000 – which means you will be stuck with a mere $100,000 upon retirement.

With pensions, a spouse can either buy out the non-participant spouse or simply give him or her a share of the benefits upon collection.

With regard to Social Security payments, spouses have to be married at least 10 years in order to collect part of the other person’s payments, if the spouse doesn’t have any work credits that may exceed half of the spouse’s.

Colorado Criminal Defense Attorney Kevin Ellmann
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