Our Florida readers might remember that last week we discussed how important it is for people who are divorcing to carefully consider how retirement assets are being divided.
Retirement accounts are one way that people can help to ensure that they have long-term security when they are ready to stop working. These accounts require contributions to be made, so people with retirement accounts have invested in those accounts. With that in mind, it is important for our readers who are facing divorce to understand some basic points about retirement accounts prior to the division process.
There are two basic types of retirement accounts. One of these is the employer sponsored retirement account, which is usually a 401(k). In a 401(k), employers can match your contributions up to a specific amount. The other is an individual-sponsored retirement account, which is usually an IRA. The IRA can be a traditional IRA or a Roth IRA.
In both of these basic types, there are some important points to remember. One point is that you might incur fees if you opt to take the money out of the retirement account early. There are some exceptions to the early withdrawal fees, so it is vital for you to understand those. If you are in the midst of a divorce, you should work to understand how withdrawing the money from those accounts might affect your divorce.
Another important consideration is that almost anything you do with a retirement account, including paying into it, can have tax implications. This is also true for a variety of other factors that have to do with dividing assets when you divorce, so make sure you understand how all of your actions and choices will affect you.
Source: FindLaw, “Retirement Plan Rules: Separating Truth from Myth” accessed Feb. 13, 2015