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Divorce may impact retirement plans

Among adults in the United States, including in Texas, who are 50 years old or older, the rate of the dissolution of marriages is nearly two times what it was in the 1990s. That means more spouses calling it quits right before their golden years. A couple of tips may help those getting a divorce in their later years to protect themselves financially.

Gathering information about all retirement savings is essential early on in the divorce process. After all, this information will help to provide a big picture about how much money has been saved for retirement and what accounts/plans feature them. For instance, individual retirement accounts, 403(b) accounts, 457 accounts, 401(k) plans and pensions can all be sources of retirement income, and all need to be split during divorce.

Any retirement plan that is not an individual retirement account requires a Qualified Domestic Relations Order to make the distribution possible. Meanwhile, a transfer involving individual retirement accounts must be done from one trustee to another. One spouse cannot simply write a big check to his or her ex-spouse, as the money will be subject to penalties and taxes.

Although divorce is complex in Texas, understanding the law can help with ensuring that one's rights are protected, particularly when dealing with asset division. If possible, the two spouses getting divorced can come up with their own plan at the negotiating table for distributing assets in a manner of which both parties approve. However, a judge will have to make the property distribution decisions for them if they are unable to see eye to eye during negotiation.

Source: cnbc.com, "A costly "gray divorce" can upend your retirement plans", Tim Sobolewski, June 21, 2017

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