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Complications of dividing a retirement plan

California couples who are getting a divorce may also need to divide a retirement plan. This can be complex for a number of reasons. One is that there is such a variety of retirement plans. They can be military, company pension or government plans, and the rules around splitting and distributing each may vary.

The amount of assets in retirement plans may be unconnected to a person's income. For example, a military person without a particularly high income may have a retirement account that is worth far more than a higher-income CEO's.

Another complication is determining the value of a retirement plan. For example, a couple will need to agree on a date of separation, and the division of the plan is supposed to be based on the worth of the retirement account on that date. This can be difficult to determine if it has been some time since the separation. It is also necessary to work out how taxes will be affected by dividing the account. With divorce on the rise for the age group over 50, protecting assets in a retirement account becomes even more critical.

A person in such a situation may want to speak to an attorney about how retirement accounts and other assets will be divided. California is a community property state, and this may also have some effect. Given the complexity of dividing a retirement account, a person might be tempted to exchange it for another asset such as real estate. However, the reality may be that the upkeep of a home represents a burden while the retirement account is ultimately worth more. People should discuss the situation with their attorney to get a clearer idea of how to help ensure their financial stability after the marriage has ended.

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