Photo of Jeanne M. Frazee

The Experience To Protect Your Rights

Photo of Jeanne M. Frazee

The Experience To Protect Your Rights

Retirement Savings Sometimes A Casualty Of Divorce

On Behalf of | Jul 20, 2020 | Divorce |

People in Michigan and throughout the United States have experienced several periods of economic hardship over the past dozen years or so. The Great Recession and housing crisis that began in 2008 forced many people to deplete their savings in a difficult job market with high rates of unemployment. We now seem to be starting another recession in response to the Covid-19 pandemic and the forced shutdown of many businesses.

When times get tough economically, many Americans turn to a resource that they would otherwise be reluctant to utilize. Specifically, it is common for people to withdraw from their retirement accounts before they actually retire. According to a recent study, the same thing is likely to happen during or after divorce.

The study was co-conducted by an economist from the University of Michigan. The results show that divorced households are about 9.5 percent more likely than others to cash in retirement savings in order to gain access to fast cash. These same households are also nearly 12 percent less likely to continue contributing to their 401(k), IRA or other retirement accounts.

Although most financial professionals would tell you that dipping into retirement savings is not a good idea, some people facing economic hardship have few alternatives. If you are about to go through divorce and need to draw on your retirement savings, however, there are some things to consider first.

Retirement Assets Often Subject To Division

Even if a retirement account is in your name only, it is likely subject to division if you contributed funds or earned interest during the marriage. These accounts are often considered marital property, and your spouse may be able to claim up to half of the value added or appreciated during the marriage.

In light of this, you should not touch any assets in your retirement account before discussing it with your family law attorney. You don’t want to take any actions that could be viewed as hiding assets or purposely trying to deplete assets ahead of the property division process.

Questions About Your Divorce Options?

There is much to consider when faced with divorce, including how to treat your assets in the time leading up to the dissolution of the marriage. For relevant, case-specific advice about your own divorce, please reach out to an experienced family law attorney.