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Should spouses tap their retirement for a divorce proceeding?

Most people dream about what they will do during their retirement. They may finally move into their vacation home fulltime, golf every morning or take time to travel across the country (or the world). Oftentimes, those dreams are squashed due to a costly divorce.

In Louisiana, most couples fear the expensive price tag that comes with a divorce proceeding. So, they do what they need to in order to cover the costs, including dipping into their retirement funds. There could be dire consequences to taking money from your 401(k) or IRA.

Raiding your retirement funds

Some spouses tap into their retirement funds, specifically IRAs or 401(k)s, to cover the costs of lawyers, court fees and mediation. However, when you start removing funds from a retirement account, you are putting yourself at risk for major problems in court due to community property division in Louisiana.

Essentially, the court will review all your assets, including debt and retirement holdings. Once the court determines the value of all the marital property, it will divide all the assets fairly between the couple. It puts most spouses at risk of losing prized possessions or important savings account.

It also means your spouse may receive half of your retirement accounts. If you withdrew from them, it could result in negative implications for you later. It also puts you in a vulnerable position if your former partner starts removing or stops contributing to a joint retirement fund or 401(k).

Investigating your options

To avoid courtroom chaos, avoid taking out money from your retirement. Instead, you may want to investigate loan options, especially a loan against your 401(k) if you have that option. Using this type of loan is easy for repayment and the application process.

You may also want to discuss with others if there any other financial options for you. You may have the right circumstances to take out money from a retirement fund, but you shouldn't do it until you know it's the best strategy for you. 

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