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Retirement accounts at risk in divorce for older adults

More Kentucky couples might be divorcing when they are 50 and older compared to previous generations. Since 1990, the divorce rate for people 50 and older has doubled. For people 65 and older, it has tripled. This can cause serious problems for people's retirements. Retirement accounts must be divided, and this can be costly. Furthermore, older adults do not have the time to replenish their retirement accounts that younger ones would have.

One issue with costs is that for a non-IRA retirement account, a document known as a Qualified Domestic Relations Order is necessary. Without this document, a person could owe taxes on the amount transferred to the spouse. However, a QDRO can be costly as well, and it is important that it be prepared correctly. Transferring an IRA has to be done as a process in which the amount goes from one trustee to the other or there could also be penalties.

A person may want to discuss the financial advantages and disadvantages of certain arrangements for property division with a financial planner. For example, a couple might be looking at having one keep the house while the other keeps the retirement account.

An arrangement like this may be an option for people who negotiate a divorce agreement. If a couple is unable to reach an agreement, the case will go to litigation, and the couple may end up with an outcome that they dislike. For this reason, it may be worthwhile to pursue dispute resolution before going to the more adversarial litigation process. In some cases, a couple may reach agreement on certain points of property division while others may still need to be dealt with in court. People should avoid the temptation to agree to financial terms that may put them at a disadvantage in an effort to get the divorce over with more quickly.

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