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Divorce mistakes to avoid in Texas: IRAs

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During a divorce, assets are divided between both parties to the marriage. However, choosing assets wisely can help increase the odds that a divorce does not derail retirement plans. One of the biggest mistakes an individual can make is to choose the house as opposed to other assets. While homes appreciate, the housing market may be less stable and provide a lower long-term return when compared to a retirement account. 

Benefits of Roth IRA when dividing assets

When choosing how to divide retirement accounts after a divorce, try to get as much of a Roth account as possible. This is because Roth IRAs or 401k accounts are after-tax accounts. This means that the government won't take some of the withdrawals in the form of income taxes. Overall, a Roth account provides for a larger payout in the long-term when compared to a traditional account, even if they have the same value right now.

Can I take funds out of an IRA?

For those who are under 59 1/2 at the time of a divorce, it may be possible to take funds out of an IRA or 401k without paying a 10 percent penalty. However, those who do withdraw funds are advised to not take out more than absolutely necessary. Coming up with a budget may prevent an individual from taking out too much now and regretting it later.

It's important to find a balance when dividing assets

While a divorce may be an emotional event, it is important for an individual to think of his or her own needs while negotiating property division issues. This may include taking into consideration which assets to claim and how much cash to keep in the bank to cover living expenses. Talking to a family law attorney may make it possible to claim a share of financial or other assets. This may make it easier to cover expenses now and in the future.

For more information about retirement accounts and divorce, call the Fort Worth attorneys at Sisemore Law Firm, P.C. at 817-336-4444. 

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