Divorce can be tough no matter what stage of life a person is in. However, it can be particularly challenging for those who are close to retirement because their retirement savings are at stake. A few tips may help individuals in Mississippi who are going through divorce address matters involving their retirement accounts wisely.
A person may receive divorce retirement distributions by rolling these assets into his or her own retirement plan; this can be done by making a request for a direct transfer. Alternatively, a person may defer taking any distributions until the owner of the retirement account retires. In addition, an individual may choose to simply cash out his or her portion of the balance. No matter which option a person selects, it is important that the individual update his or her beneficiaries. One's ex-spouse likely will not be a beneficiary unless this is required by the divorce settlement.
Also, various types of retirement accounts have varying tax consequences. Money is contributed to a traditional IRA, 403(b) and 401(k) pre-tax; meanwhile, a person contributes to a Roth IRA after he or she has paid income tax. As a result, removing money from certain accounts has tax implications, so the total in an account might not be what a person will end up with.
Appropriate legal guidance in Mississippi may help people make wise decisions regarding how to split their retirement savings during a divorce. If possible, it may be beneficial for the divorcing individuals to try to work out these details on their own through divorce negotiation or mediation. However, if they cannot see eye to eye, a judge will have to make these critical decisions for them.
Source: Time, "Divorce: Who Gets Retirement Accounts?", AJ Smith, Nov. 16, 2015