Dividing retirement accounts and investments may be the last thing on the minds of a Georgia couple going through a divorce. Issues like child custody, alimony or real estate often seem to get more attention. As a result, a divorcing individual may agree to a buyout of a retirement asset, just in the name of administrative ease. However, doing so could shortchange one’s long-term financial planning and lead to nasty tax consequences.
Retirement and investment accounts such as 401(k)s, pension plans, IRAs and stocks are part of the marital estate that must be divided in a divorce. In some instances, it may be possible to separate retirement accounts into two individual accounts. In other instances, a payout may be the only option. Often, an expert may be required to advise the best strategy, such as whether it may be more beneficial to accept the current cash value of a stock instead of the security itself.
Sometimes a spouse may be presented with the option of retaining the family home in exchange for giving up an ownership share in securities. However, an individual’s budget after a divorce will likely be much different. For that reason, it may not make sense for either spouse to retain the real property.
A recent study underscores the importance of making informed retirement choices during a divorce. According to the study, the average divorcee has $10,000 less in retirement savings than his or her married counterpart. With the help of an experienced family law or divorce attorney, an individual can make choices that will ensure a financially sound and smooth transition into their post-divorce life.
Source: CNN Money, “Rebuild your nest egg after divorce or widowhood,” Beth Braverman, Donna Rosato and Penelope Wang, Feb. 18, 2013