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Accounting for retirement in a divorce

People at or over the age of 50 in Minnesota and around the country are more likely to get a divorce than couples in the same age group 25 years ago, according to a study conducted by researchers at Bowling Green State University. In doing so, they may put their retirement plans at stake. However, there are steps they can take to help secure their future despite the divorce.

One option is selling the house. Income drops precipitously for both men and women after the end of a marriage although the 23 percent average drop for men is nearly half what it is for women. However, moving to a less expensive place can free up hundreds of dollars that can be placed into an income-generating account toward retirement.

When dividing retirement accounts in the divorce, people should note whether or not distributions will be taxable and should make their decisions accordingly. Factoring in Social Security is also important. If one spouse's Social Security benefit is significantly higher than the other and the marriage was at least 10 years long, the lower-earning spouse can opt to receive an amount that is up to 50 percent of the other spouse's benefit if that is more than their full benefit.

In some relationships, one spouse has handled the family finances while the other may not know much about them. Those who have less financial experience must be particularly careful to ensure that they understand the implications of property division and are not taken advantage of. For example, selling the house may be a better deal than keeping it in exchange for a retirement account because there will be expenses associated with maintaining the home including taxes, insurance, utilities and general upkeep. A family law attorney will take these and other similar matters into account when assisting a divorcing client in negotiating a property settlement agreement.

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