Why Divorce Forces Many People to Drain Their Retirement Accounts
Our Grand Rapids high-asset divorce attorney knows that going through a divorce can be stressful and challenging, even when spouses agree to work together to end their marriage. But according to a new study from the University of Michigan, it can also have a crippling effect on your prospects for retirement.
Divorce is the top reason that Americans raid their retirement accounts early, Michigan researcher Frank Stafford found. Those people are often looking for fast cash to fill the gap left by a decline in income following a divorce, Stafford and University of Delaware researcher Thomas Bridges concluded.
They also said the raiding might become more common thanks to the economic downturn caused by the coronavirus pandemic.
“Increasingly, retirement savings are being used to finance current consumption, notably during periods of income decline,” Stafford said. “From our work, we expect to see heavy access to pre-retirement pension balances, and ceasing to participate in contributing to pension in response to the economic impacts of coronavirus.”
The researchers found that divorced people are nearly 10% more likely than others to tap into their retirement savings early. That means they have to pay early withdrawal fees and will have less money saved for retirement.
“There is the short-term benefit of greater liquidity through reducing contributions to, or withdrawing cash from, retirement resources, and this liquidity feature may substantially benefit constrained households,” Stafford said. “Of concern, however, is the effect of repeated use of these more flexible retirement account saving features on longer term savings adequacy.”
High-Asset Divorces in Michigan
Divorcing spouses with high assets may be less likely to turn to retirement cash after a split. Still, these divorces can raise several issues that can significantly impact each spouses’ financial well-being.
Any assets obtained by one or both spouses during the marriage are likely to be considered marital assets, subject to division in the event of a divorce. That is true regardless of whether both spouses contribute financially over the course of the marriage or one spouse was the primary “breadwinner.”
In some situations, even separate property obtained by one spouse prior to the marriage may be subject to division. That is especially likely in situations where the assets have been comingled or otherwise treated as marital property during the marriage.
That is why it is vital that a person involved in a high-asset divorce seek an experienced lawyer’s advice. In Michigan, a Grand Rapids high-asset divorce attorney at Kraayeveld Law can help you understand your rights and options and develop a strategy to protect your assets.
Speak With A Grand Rapids High-Asset Divorce Attorney Today
Are you considering filing for divorce? If so, we encourage you to contact us for a free consultation. A Grand Rapids high-asset divorce attorney will give you an honest assessment of your situation.