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How the home may help with retirement after a divorce

On Behalf of | Jun 20, 2018 | Divorce

Some California women who are divorced might be in better shape financially in retirement if they kept the home as part of a property settlement. However, financial advisers often tell women to get rid of the family home for a number of good reasons.
It is not unusual for people to suffer financially after a divorce. A study by the Center for Retirement Research found that households that have not been through a divorce have a net wealth that is about 30 percent higher than households that have. There is about a 5 percent higher chance that divorced people will run out of assets compared to people who are not divorced. The one exception is women who divorced and are single at retirement, and the difference seems to be whether the woman kept the house or not.
The main reason women are advised against keeping the home is because of the additional costs of insurance, upkeep, taxes and more above and beyond the mortgage. According to one financial adviser, if they cannot keep the home for at least five years after retirement, it is usually a mistake to try to keep it at all. However, if it is possible to keep it for longer, it can represent a source of significant investment and equity over time and into retirement.
People who are going through a divorce might want to discuss what to do with a home and whether keeping it might be feasible as part of property division. In some cases, it might be possible to work out an agreement in which one person keeps the home and the other keeps the retirement account, but both spouses should look at all aspects to make sure this is a good deal. For example, whether the retirement account will be taxed on withdrawal should be considered in assessing its value.