Many high-earning Michigan residents store a substantial amount of assets in 401(k) plans and other forms of retirement funds that can generate additional funds through interest. If these individuals decide to divorce, however, their retirement accounts could be in jeopardy. The financial repercussions of divorce can linger long after the emotional or practical changes that accompany the end of a marriage have faded. Even for high earners, rebuilding retirement funds can take work and planning, especially given the annual cap on contributions to certain qualified plans.
During a divorce, retirement funds are often split in two. This division can come as a psychological blow, even for wealthy couples when both parties will leave the marriage with substantial assets. Unlike homes or joint banking accounts, most retirement funds are held in the name of one person and feel less like joint property. In addition, the process of dividing the funds must strictly follow mandatory rules in order to avoid costly and unnecessary taxes and other fees.
People of all means can be significantly affected by divorce. On average, households with a divorce in their past have around 30 percent less net worth than households that have never been divorced. Furthermore, divorced people are 7 percent more likely to lack the savings needed to get through their retirement years.
Dealing with a high-asset divorce requires attention and care to disentangle years of complex financial arrangements and accounts. A family law attorney can work with a high-earning divorcing spouse to protect key assets from an unfair distribution.