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Separating spouses should seek retirement benefits over houses

Individuals in the midst of divorce in Texas may not be aware that they may be able to claim a share of their spouse's retirement benefits. According to a survey conducted by the Securian Financial Group, 31 percent of the 546 people interviewed did not know claiming retirement benefits was an option and a quarter of those surveyed stated they wished they had been more knowledgeable about how to properly divide these benefits.

There are several tips separating spouses may use to secure financial stability for their future retirement. Hiring a financial planner may be beneficial in determining what an individual is entitled to and how he or she should steer through tax laws. Though the house is the most fought-for asset in a divorce, experts recommend selling the home and sharing the profit. A home has an unpredictable future in terms of value and often requires cash to maintain. The value of a retirement savings, on the other hand, may be significant and has potential to grow.

If an ex-partner has a Roth IRA or Roth 401(k), it is advisable to fight for those instead of a standard 401(k) or traditional IRA. The latter plans are taxed when money is withdrawn in retirement, while the Roth IRA and Roth 401(k) earnings were accumulated with after-tax dollars. Further, if one is awarded his or her ex's retirement funds, the individual should avoid cashing out and, instead, roll over any employer-sponsored retirement funds into an IRA. Those under the age of 59 1/2 are allowed a one-time, tax-free withdrawal; anytime after incurs a 10 percent early withdrawal tax penalty.

Along with a financial adviser, an attorney may help those seeking to divvy up retirement benefits protect their interests. Whether a settlement is agreed upon amicably or through litigation, a lawyer may have the experience to ensure an appropriate outcome.

Source: Forbes, "The Big Money Mistake Divorcing Women Make", Kerry Hannon, July 03, 2014

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