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Looking ahead towards retirement after a divorce

Couples going through a divorce in Massachusetts have many tough decisions to make. In addition to child custody and support concerns, couples are left with the task of dividing the marital property between them. When this happens, couples should not only consider their immediate needs but also their long-term financial goals, such as retirement.

For example, many spouses wish to keep family home after a divorce. However, a home's equity can fluctuate over the years, not to mention the many unexpected expenses that are part and parcel of owning a home. Comparatively, money stashed away in an account such as a 401(k) may be a more stable source of income when it comes to retirement.

In addition, it is important for a couple to ascertain the actual value of a retirement account during the property division process. Some accounts, such as a 401(k) or an individual retirement account, will be taxed when the retiree makes withdrawals. However, other types of accounts, such as a Roth IRA, will not be taxed upon retirement. Couples should keep the tax consequences of any retirement accounts in mind when determining who gets what after the divorce.

Massachusetts is considered an equitable distribution state. Unlike community property states, which will divide any marital property equally after a divorce, in equitable distribution states the judge has discretion as to how to divide the property between the spouses. Retirement accounts are just one asset that the court will divide. Other assets may include houses, cars and joint bank accounts. Sometimes these assets will be awarded to either one spouse or another, but other times these assets will be sold and the proceeds will be divided between the spouses. However, in equitable distribution states this division may not be 50/50.

The end of a marriage can be seen as a new beginning for many spouses. By keeping retirement considerations in mind throughout the divorce process, each spouse may be able to preserve their future economic stability.

Source: Huffington Post, "4 Divorce Mistakes That Can Derail Retirement," Marilyn Timbers, Aug. 27, 2013

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