Older California couples who are getting a divorce may have more difficulty recovering financially than younger people would. The problem is that they have less time to rebuild their finances before their retirement. Furthermore, they might have fewer employment opportunities. They might also make financial errors that could compound the situation.
One of those mistakes is failing to take into account the loss of value from taxes and penalties on brokerage and retirement accounts. Liquidating a brokerage account could result in a long-term capital gains tax. Withdrawals from a traditional IRA or a 401(k) are subject to income tax.
Another danger is making decisions about assets that are driven by emotion. One of the most common emotion-driven decisions in this respect is keeping the home. A person might give up other assets in order to do this. However, this could be a problem if that person is unable to afford the upkeep. People should also keep in mind that their circumstances could change.
Divorce can also be expensive even when it is amicable. When it is contentious, couples could spend as much as $200,000 or more fighting over assets that will secure their financial futures.
For these reasons, it may be important for a person going through a divorce to discuss goals with an attorney. In divorces involving significant assets, a person might be particularly concerned with protecting a business or a certain property. For example, while inheritances are generally considered not considered to be shared marital property, if they are commingled with the couple’s assets, that could change.