During divorce, important decisions must be made about the distribution of martial retirement assets, including 401(k) accounts. Beginning in 2018, a new IRS tax rule on 401(k) contributions could have an impact on divorce asset division and other income-related aspects of divorce. Here’s what you need to know.
How 401(k) plans will change next year: Recently, the IRS announced that 401(k) contribution limits will increase by $500 per year beginning this January. That means that in 2018, employees who participate in the employer-sponsored program can put in as much as $18,500 pre-tax dollars per year, up from $18,000 in previous years. The savings could eventually add up to more than $70,000 extra for retirement for those who begin saving by 30, according to a CNBC analysis.
While $500 may not seem like a lot of money independently for an isolated year, this amount can grow significantly when contributed over a lengthy period of time and make a dramatic impact upon overall retirement savings.
In divorce, this new limit could potentially decrease income levels used in calculations, impacting alimony and child support amounts. Higher projected savings in future years could also increase flexibility in negotiating assets.
A divorce and family law attorney can assist in explaining how retirement funds and this savings component are relevant when dealing with asset division and income-based issues such as alimony and child support.
Would you like us to show you exactly how this new 401(k) contribution rule could come into play in your divorce settlement? Please contact us to schedule an initial attorney consultation. Secure your future. Call today: 888-888-0919.