For many Arizona couples who are going through a divorce, particularly a high-asset divorce, retirement accounts usually aren’t that high on the priority list when it comes to assets at issue. Why not? Well, for many of these couples, there are more pressing concerns, such as what will become of the family home, or child custody and support. However, couples should not overlook the value of retirement accounts, and, as a recent article noted, couples should do their best to seek to preserve the funds in these accounts.
But, as the recent article pointed out, sometimes the divorce process can be expensive. And, in many cases, either one of the soon-to-be ex-spouses may come to the realization that they do not have the funds to go through the process as they would like. It is at this point that they may consider withdrawing funds from a retirement account. According to the recent article, this can be a big mistake.
Our readers may not realize that if they withdraw funds from a retirement account before they are eligible to do so, they will likely be subject to taxes and a tax penalty. This long-term loss for short-term gain usually isn’t worth it.
When it comes to retirement accounts, perhaps the best course of action for any divorcing couple is to try to reach an out-of-court agreement on how those funds will be divided. This approach will likely not only save the couple money on funding the divorce process, but may also result in remaining stability in the retirement accounts that they have both worked hard for years to bolster.
Source: The Motley Fool, “How to Protect Your Retirement Savings During Divorce,” Sarah Szczypinski, Sept. 2, 2017