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How retirement plans can be impacted by divorce

Divorce can be hard on Illinois residents and others throughout the country. However, it may also be a source of happiness for some who have chosen to end their marriage. According to a representative from the American College of Financial Services, women between the ages of 60 to 65 tend to enjoy the fact that they are not married. Regardless of how a person feels after ending a marriage, it can have a financial impact that needs to be accounted for.

For instance, it may be necessary to divide an IRA or a 401(k) as part of a divorce settlement. Pensions may also be divided in a divorce, but there are certain protocols that must be followed to do so. Qualified accounts such as a pension or a 401(k) must generally be split per the terms of a qualified domestic relations order.

Couples who own a home together that has positive equity may need to determine how to split it. In some cases, the home may be sold and the equity split per the terms of the final divorce settlement. It may also be possible to get a reverse mortgage in an effort to extract equity without having to sell the home. The spouse who leaves the house will receive roughly half of each payment.

In a divorce, property division issues could be among the most contentious. This may be especially true if a person is older and has neither the time nor the ability to recover assets lost in a divorce. An attorney may be able to help an individual create a divorce settlement that makes it possible to retain a marital home or retirement assets. A settlement may also provide other resources that make it easier to maintain a reasonable lifestyle.