There are more baby boomers divorcing than ever before in Minnesota and the rest of the country. The National Center for Family & Marriage reports that the divorce for couples over age 65 has tripled between the years 1990 and 2014. Baby boomers must look out for potential mistakes that they could make during the divorce process.
Due to the rising divorce rate, more baby boomers may be concerned about their retirement accounts. They may have spent a lifetime saving funds that must then suddenly be split in two. One mistake that some spouses make is to trade off their interest in a retirement account for real estate. Many spouses may think that having a home will provide them with greater security. However, the value of real estate may fluctuate more than that of retirement funds. Additionally, homes need upkeep and may cost more in the long run. Many spouses may think that this swap is fair, but the person who winds up with the real estate could wind up disadvantaged when the other spouse gets to keep the entire account that has accumulated value over a lifetime.
Another mistake to avoid in divorce when dividing retirement accounts is not considering the tax implications. Pension, 401(k) accounts and traditional IRAs are taxed at the time that money is withdrawn while Roth IRA and Roth 401(k) accounts are taxed upon withdrawal. Likewise, if the spouses are in different tax brackets, equal interests in the retirement account may net different amounts.
Individuals who are going through divorce may consult with a family law attorney. He or she may be able to provide information about how different assets are treated based on state law, including retirement accounts. The lawyer may be able to provide specific tax information and consult Minnesota laws that indicate how marital assets such as retirement accounts are generally divided.