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Renewing a retirement plan after a divorce

On Behalf of | Aug 14, 2018 | Divorce

Kentucky residents who decide to divorce may face more significant, longer-lasting financial changes that far outweigh the emotional issues that can accompany the end of a marriage. After years of building savings accounts, the division of assets that comes with divorce can lead to major changes in each partner’s budget and approach to spending. One of the most significant asset types dealt with during a divorce is the couple’s retirement savings. These funds are often a couple’s largest single asset, and the distribution that comes with the divorce may spark each partner to begin saving intensively for the future.

While spouses often expect subconsciously to divide major marital assets like homes and bank accounts during a divorce, the psychological impact of dividing retirement funds can be more substantial. This is because they are usually held in only one person’s name. There are also financial specifics to be aware of when dealing with the distribution of a retirement fund. Dividing certain types of qualified plans require following specific rules to avoid unnecessary and costly taxes and fees.

Spouses may divide retirement funds in different ways, depending on the history of the accounts and how long they were together. In some cases, one large account may be divided in half. In other scenarios, each partner may walk away with his or her own retirement account.

Divorcees can struggle financially, and the division of retirement funds can require exes to rethink their savings plans. After all, statistics show that Americans who have been divorced are 7 percent more likely to be unable to meet their financial needs in retirement. A family law attorney can work with a divorcing spouse to reach a fair settlement in terms of property division and spousal support.