Think about how your divorce will impact your Texas retirement
Couples headed toward divorce often disagree about the terms, including how to handle child custody and asset division. When you can’t set the terms between yourselves, you will have to rely on the courts to make those critical decisions for you. That can leave you in a position where you have no power over the outcome of the divorce.
It’s only natural to wonder what the likely outcome of your divorce proceedings will be, especially when it comes to significant assets. From your house to your fine art collection and retirement account, knowing how the courts view and handle various assets makes it easier to understand the likely results of your divorce. Retirement accounts, in particular, may be a point of contention for older couples facing divorce.
Texas looks at when you deposited funds, not the name on the account
When it comes to determining if a retirement account is marital property or separate property, the most important guiding factor will be when the funds went into the account. Deposits made prior to your marriage and, potentially, interest on those funds, may end up considered separate property. Anything contributed toward the account after your marriage, however, is likely marital property.
Regardless of who held the account and who contributed more money toward it, the courts will most likely divide the assets or use the value of the account to offset other considerable assets in your divorce. You could end up with half of the amount you were planning on for retirement. Thankfully, so long as the splitting of the account results from a court order, you won’t incur tax penalties or fees.
You may find yourself using savings to pay for divorce
Other than home equity, a retirement or investment account often represents one of the biggest assets of your life and your marriage. However, with all the expenses of divorce, you may have no other option but to dip into those funds to pay for your divorce. When that happens, you can reduce the amount of money you have to rely on when you decide to retire.
The lower your retirement savings dip, the more important it becomes for you to reconsider your retirement plans. After all, you expected to pay for one house with twice the assets, and now the same amount will need to cover two separate households for the duration of your retirements. Even if you don’t touch your retirement account to pay for the divorce, you will have to adjust your expectations for retirement.
Considering different living situations, such as sharing a home with friends or living with your children, may be a good option. Reducing your plans to travel or continuing to work for a few additional years to rebuild your retirement fun are also solid ways to offset the financial impact of a divorce.
