Divorce not only impacts your heart but also your wallet. The financial consequences of ending your marriage may be especially problematic if you are having a late-life divorce. If you are not careful, your divorce settlement may derail your retirement plans.
According to the Washington Post, one in four divorces occurs among couples who are 50 and older. This may seriously affect your finances. Here is how to mitigate the negative impact of divorce on your retirement.
Do not fight to keep the house
When you are negotiating your property division, you may have your heart set on keeping the family home. However, this may be a mistake. If you give up more of your retirement funds in exchange for the house, your future may be in jeopardy. Consider getting into a buy-sell agreement with your spouse so that you can both get some extra money to make up for the cost of your divorce.
Do not make early withdrawals
Getting a divorce may be hard on your wallet, but be wary of tapping into your retirement savings to cover your expenses. While you may be struggling to deal with court costs and increasing living expenses, do not put your future at risk. Instead of taking money from your retirement plans to pay for divorce expenses, you should try to lower your lifestyle expectations and live on a tighter budget.
Divide your retirement accounts properly
If you split your retirement accounts during your divorce, you may face a hefty tax penalty. However, you can avoid this consequence by submitting a qualified domestic relations order to the court. A QDRO will let you divide your retirement assets without taking on any taxes or penalties.
A divorce may be a bumpy journey, but it does not need to completely decimate your future. With the right legal help, you can keep your retirement preparations intact.