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Retirement considerations in the property division process

Divorce can be a nerve-racking experience. For couples over the age of 50 one of the biggest concerns is whether dividing marital property will have a significant effect on their retirement. While divorce will likely have some financial impact, with a little planning it is possible to minimize the damage. Minnesota couples pondering divorce may find the following tips on planning for retirement during a divorce asset split helpful.

One consideration couples should keep in mind is that the family home is not always the ticket to retirement. While historically homes have been a source of wealth for American families, property actually fluctuates more than retirement savings accounts, for example. So, if the negotiation is down to a larger portion of one or the other consider the appreciation and the tax consequences of both items before making a decision.

Couples should also note that not all retirement funds are created equal. The truth is, accounts like a Roth IRA and a 401(k) are actually treated differently by the government. With a Roth IRA, for instance, withdrawals are not taxed when money is withdrawn during retirement, because it is an after-tax savings vehicle. The same is not true for pre-tax savings accounts like a 401(k) or 403(b).

Finally, when dealing with property division issues during a divorce it is important to remember that a fair division of marital assets is not necessarily an equal division of assets. While one it may appear that one party is receiving the same portion of the estate as the other because the assets are split 50/50 from a dollar and cent perspective, this may not be true from a long-term retirement perspective.

Certainly, the property division process during divorce can appear daunting given the complexities of many married persons assets. For this reason, it can be helpful to work with an experienced attorney to help ensure that all property is appropriately classified and split in a manner that can leave those newly single in a positive position post-divorce.

Source: Forbes, "4 Divorce Mistakes That Can Derail Retirement," Marilyn Timbers, Aug. 21, 2013