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The smart approach women should take to divorce

The differences between women and men play out in all aspects of life, but they may be most detrimental when it comes to how women approach divorce. There are a number of ways that Michigan women can protect themselves when it comes to the end of their marriage.

An important statistic to first consider is the increasing rate of divorce among the older population, specifically among those who are 50-year-old and over. According to the National Center for Family & Marriage Research, the rate of divorce in this age group doubled from 1990 to 2010. Now that a larger percentage of older couples are getting divorced, retirement assets should be a big concern.

During property division, conversations usually revolve around real estate, the family home, cars and sentimental items. But retirement plans, like 401(k)s and IRAs, need to be part of the settlement discussion as well. These can be significant, if not the most significant, assets for older couples.

Many people do not ask for a cut of their spouse’s retirement benefits because they do not even realize it is an option. Divorcing women should know that if a retirement benefit qualifies as marital property, generally that benefit can be divided in a divorce settlement agreement.

It may be tempting for a woman to fight for her home during a settlement negotiation. But owning property may prove to be costly, and future home values are not always predictable. The better option may be to sell the home and split the money and spend more time focusing on the retirement benefits, which are more likely to appreciate in the future. On that same note, it may be better to bargain for retirement benefits which have long-term potential over alimony, which is usually a short-term plan.

If given the choice, women should opt for part of a Roth IRA or Roth 401(k) over the traditional version. Traditional accounts will be taxed on withdrawals, while Roth earnings are not taxed on withdrawal. And do not forget about a spouse’s Social Security benefits during settlement talks. Couples married for at least 10 years and over the age of 62 can collect half of a spouse’s Social Security benefits without impacting the amount that the spouse receives.

Source: Forbes, “The Big Money Mistake Divorcing Women Make,” Kerry Hanon, July 3, 2014