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The many ways divorce can impact your retirement plans

Getting a divorce will change just about everything about your current life. You will likely end up living somewhere different. If you have children, you will have to divide your time with them with your spouse, meaning you won't see them on every holiday. Divorce can also have a profound impact on your financial situation.

Most couples realize that they will end up sharing both marital debts and assets with their spouse. Barring a legally sound prenuptial or postnuptial agreement, the asset division process can often prove to be unpredictable. One of the things it often impacts is your retirement plans, and not just because you'd now be traveling on your own.

Many couples dip into savings to pay for divorce

The more contentious and drawn-out your divorce becomes, the more expensive it will be. Of course, securing a fair asset division outcome and custody agreement are worth the expense, but you need to know that divorce litigation will cost quite a bit. While some people can pay for their share of court costs and attorneys' fees out of their standard income stream, other people cannot.

Many people have to pull money out of savings, investment or even retirement accounts to pay for their divorce. Doing so will mean that you need to take the time to rebuild those critical assets before you retire. Failing to do so could leave you in a financially vulnerable position.

Your pension and retirement account will probably get split

While no two divorces are the same, there is reason for most divorcing couples to expect to divide their retirement funds or pensions. The courts in Virginia seek an equitable and fair solution for splitting up your marital assets. That typically includes contributions to retirement accounts made during marriage and pensions, depending on the length of your marriage.

The courts will look at a variety of factors, including your income, economic circumstances, child custody arrangements, child and spousal support amounts, and special medical needs when determining how to split these assets. Even if only one spouse contributed financially to an account, it could still end up divided in divorce. Military pensions, as well as pensions from private employment, may end up divided or used to offset other assets of value in the division process.

Be flexible with your expectations

The closer to retirement age you are when you file for divorce, the more likely it is that you will need to change how you approach retirement. In some situations, you may need to work full- or part-time for several additional years to rebuild your savings. In other cases, you may need to explore more affordable living arrangements, like living with your children or a roommate, to ensure you live within your means.

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Jeffrey A. Vogelman and Associates
124 South Royal Street
Alexandria, VA 22314

Phone: 703-650-0367
Fax: 703-836-3549
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