The Effects of Inflation on the Division of Assets and Retirement Accounts in Divorce Proceedings

 Posted on August 10, 2023 in Divorce

One major aspect of divorce is the division of assets, including retirement accounts. This is often seen as a complex process. Inflation, and its effect on the value of assets after divorce, is something that divorcing couples should consider.

Understanding Inflation’s Impact

Inflation erodes the buying power of money over time. The value of assets may diminish in real terms as the cost of living rises. This dynamic can have massive implications in a divorce for asset division and retirement accounts.

Assets Affected by Inflation and How to Protect Them

There are certain assets, such as savings accounts, 401(k)s, and IRAs, that are more subject to inflation’s effects. Cash assets can be particularly prone as their value falls with rising inflation rates. In contrast, real estate has historically been viewed as a potential guard against inflation, as property values tend to increase over time.

Divorcing individuals need to be proactive in safeguarding their assets from inflation’s impact. One option is to consider spreading assets across different investment vehicles that may have varying degrees of inflation resistance. Consulting with a financial advisor experienced in divorce cases can be helpful in crafting a long-term financial plan.

Inflation can affect alimony and spousal support payments. Courts will usually base these costs on the standard of living established during the marriage. However, inflation is not always factored in. In this case, the purchasing power of those payments may fall over time. This could lead to future financial problems for the receiving spouse.

Evaluating Retirement Accounts and Considering Future Expenses

Individuals should carefully consider several factors when assessing retirement accounts. The following factors can play a large role in this decision-making process:

• Types of retirement accounts

• Current and potential value

• Economic conditions

• Life expectancy

• Future retirement needs

• Tax implications

• Legal and tax advice

Anticipating future expenses is important when discussing asset division in divorce. As inflation reduces the value of money, living costs, healthcare expenses, and other needs may increase. When people get divorced, they need to figure out how to split their assets. They should talk to a lawyer or financial advisor to make sure they get a fair deal, especially if they think prices will go up in the future.

Reach Out to a DuPage County, IL Family Law Attorney

Handling the division of assets should be done on your own terms. The DuPage County, IL family law attorneys at Calabrese Associates, P.C. can aid you in resolving the division of assets, whether through negotiation or litigation. You can call us today at 630-393-3111 to schedule an appointment where we can discuss your case for reaching an amicable outcome.