Avoid these common financial mistakes

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ST. LOUIS (KTVI) - Matt Allgeyer, financial planner at Wamhoff Financial Planning & Accounting Services, visits Fox 2 News to explain some common mistakes and provides advice on how to avoid them.

Mistake #1: Ignoring the tax implications of retirement funds
• Depending on your tax bracket, you may be taxed differently on the monies than your soon-to-be ex-spouse.
• If your income is lower, you may reap more benefit from a 401k division than the higher earner.
• Be aware of the funds you choose. If your ex-spouse wants to give you more of their 401k and keep more of their Roth IRA, be careful. You will pay tax on all the 401k when you withdraw it in retirement, but you will pay no tax on the Roth funds if you hold them until age 59-1/2.
• You may also roll your portion of the ex-spouse’s IRA or 401k (even while he or she is still working), and with a qualified domestic relations order (QDRO) move those funds to a self-directed IRA and continue with the tax deferral of that account until you reach age 59-1/2.

Mistake #2: Simply choosing the house over other financial assets
• A house, unlike an investment account, is more likely to have unexpected and larger expenses without a future value that you can identify.
• You will most likely not use your house to fund your retirement because you will still be living in the home.
• Before making any decision, remove the emotion and analyze which choice may be more financially advantageous for your situation

Mistake #3: Tapping into retirement savings because of the tax penalty waiver
• This money is (and should remain) set aside for retirement, however many newly divorced individuals use a substantial portion to get back on their feet.
• This depletes the one asset that may help you get through retirement most. Remember, you have 20-30 years to live in retirement, so be careful when making the choice to tap into this money.
• Consider all other viable funding resources, and consider this a last resort.