The overall divorce rate throughout Virginia and the rest of the U.S. has gone down over the past few decades. However, there has been an increase in divorces among couples who are 50 years of age and older. These are known as gray divorces.
Gray separations bring a variety of complex issues that do not always accompany divorces among younger couples. For example, splitting an IRA when a couple is under 50 years of age is pretty straightforward. This gets complicated when couples over 50 have IRA accounts with outgoing 72(t) distributions.
There are several reasons why a person may decide to tap into their retirement account before the age of 59 and 1/2. For example, they may be experiencing financial difficulties or retiring early. One or both partners may use money from their IRA and schedule annual payments that are known as 72(t) distributions. When these IRA assets are split during a divorce, the situation can become quite complicated.
The situation may get complicated because of penalties that are attached to taking out money from an IRA early. When Congress created the IRA, it was to help people take care of their financial needs after retiring. Using this money early has strings attached. If one takes money from their IRA, they will likely be subject to the usual income taxes and a penalty of 10%. However, some exceptions exist.
Someone over 50 who is considering divorce might want to discuss their situation with an attorney. Legal counsel could answer questions about splitting an IRA and other issues related to dividing assets. The attorney may be able to help a client file divorce papers or provide other practical assistance.