Those in North Carolina who want to divorce generally need to think about how their decision will affect their financial future. Divorce is not only an expensive process, it is also one that diminishes financial holdings and sometimes generates ongoing support obligations.
Those who are close to the age of retirement, in particular, will want to carefully consider how ending their marriage could potentially change their retirement plans. There are multiple ways in which someone’s divorce could alter retirement plans, and the three challenges below are among the most common.
People may need to divide their savings
What someone has set aside for retirement could be only in their name and held in an account managed by their employer. They might assume they won’t have to share those savings when they divorce. However, the amounts that the worker and their employer contributed to their retirement savings during the marriage will probably be subject to division. The equitable distribution rules in North Carolina make even assets held in the name of one spouse part of the property division process in most cases.
People could lose money to early withdrawal fees
One of the biggest mistakes that people make when handling retirement savings in a divorce is the decision to directly handle the transfer of funds or to liquidate retirement savings before someone is old enough to access them without penalty. Spouses can potentially eliminate the financial penalties and taxes triggered by the divorce-related division of their retirement savings by Drafting and properly following a qualified domestic relations order (QDRO).
The same savings will have to go much farther
It costs far more or two people to maintain separate households than it does for that same pair to share a home and all of its ongoing maintenance expenses. What people have set aside for retirement may not be enough when they need to use those funds for two people’s financial stability instead of one joint household.
Some people may need to change how they invest their retirement savings. Others may choose to alter their lifestyle plans during retirement or continue working for a few extra years so that they have more money set aside. Recognizing the damaging consequences of divorce on retirement finances and seeking legal guidance accordingly can help people to better plan for their happy future after divorce.