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Points to consider when dividing retirement accounts

South Carolina couples over the age of 50 may be more likely to divorce than couples in their age group in past years. In 1990, fewer than half the number of couples over 50 divorced compared to today. While the main concern among younger couples who divorce might be child custody, for older couples, the focus is often on retirement accounts.

Divorcees need to keep a number of points in mind when they consider how their retirement accounts will be divided. For example, some types of retirement accounts, such as pensions and IRAs, are taxed when money is withdrawn while others, such as a Roth IRA, are taxed at contribution. Therefore, the value of retirement accounts after tax should be considered. Furthermore, people should keep in mind that the amount of money they make will affect which tax bracket they are in. Therefore, they might want to consider having each person take a different pre-tax amount to make the amount roughly equal after taxes.

Some financial experts say that divorcees should avoid the temptation to exchange a house for a retirement account. Even if a house seems more valuable, its upkeep may be expensive. A dependent spouse may also not realize how much the retirement account is worth.

While a judge can make a decision about how a couple's property is divided, the couple also may be able to negotiate that division. It is important to strike a balance between protecting one's financial future while not dragging the process out. An individual may want to discuss the situation with their attorney to help ensure that they make practical decisions rather than decisions that are driven by emotions during a stressful time.

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