The end of a marriage can lead to a financial hit that has many future ramifications. This is because in a divorce, retirement accounts such as IRAs and 401(k)s may need to be divided. In some cases, an ex-spouse in Washington can lose hundreds of thousands of dollars. As the law limits 401(k) contributions to $18,500 for those 50 and younger, it can be hard to regain a nest egg once it’s lost.
One who primarily receives funds from an IRA or 401(k) as part of a divorce settlement may also struggle financially. However, the struggle can be even greater for someone who doesn’t work or otherwise generate income that can be used to further grow a retirement fund. For some, it may be necessary to use a combination of alimony and other benefits to make ends meet. To get the largest possible payout each month, a person will ideally wait until age 70 to start collecting social security.
For divorcees who do have jobs, it can be worthwhile to contribute the maximum annual amount to a 401(k) or IRA. Putting money into a taxable investment account is another way to quickly rebuild financially after a divorce.
The end of a marriage could have a massive impact on a person’s finances. Therefore, it is often in one’s best interest to consult with an accountant and attorney during the divorce process. Doing so may provide a clearer picture of what is needed from a divorce settlement and how to go about getting it. An attorney may be able to represent an individual during mediation sessions or in a formal divorce trial.