New Jersey residents who are getting a divorce should take steps to protect their retirement plans. This may be particularly important for older couples as divorces of people over the age of 50 are on the increase.
However, dividing a retirement plan in a divorce is not a simple matter. Retirement plans may be company pensions, military plans or government plans. Regulations about how they are divided, taxes and more will differ. Furthermore, a person’s income level may not be connected to the worth of the plan. A corporate executive may have much less in a retirement plan than someone with a lower annual income who is in the military.
Dividing a retirement plan may also involve complex calculations to determine its worth. In many cases, the value of an asset is based on the date of separation. However, several months or years may pass between
the date of separation and the day when the account is divided up. There may also be complications around fees, taxes or loans.Whether a divorce happens due to irreconcilable differences or for another reason, it is important for people to think about their financial stability. The end of a marriage often leads to a lower standard of living and a financial struggle for one or both parties. A person might be tempted to give up a claim on a retirement account in exchange for another asset, but this may not be the best move in the long term. A prenuptial agreement may also affect how or whether a retirement account is divided. However, one that was signed under duress could be successfully challenged at a later date, which is why an attorney will often recommend to a client who is considering one that it be negotiated and signed well in advance of the wedding.
