Which of the following is a common mistake divorcing couples make?

Failing to consider the tax consequences of an early withdrawal from a retirement account is indeed a common mistake made by divorcing couples. When individuals withdraw funds from retirement accounts such as 401(k)s or IRAs, they often overlook the immediate tax implications. These withdrawals may incur significant taxes and penalties if taken out before the age of 59½, which can drastically affect the net benefit of the funds being withdrawn. It is essential for couples going through a divorce to understand that their financial decisions regarding retirement accounts can have long-lasting impacts not just on their current financial situation, but also on their future income and retirement plans.

This oversight can lead to underestimating the true value of the retirement assets involved in the divorce settlement. Couples may focus on the gross amounts available in these accounts without considering that accessing these funds prematurely can result in a considerable tax obligation, thus reducing the actual financial benefit derived from the division of assets.

In contrast, dividing a joint checking account, using the cost basis for property sales, and analyzing taxes on child support payments, while important, are less likely to be viewed as critical mistakes compared to the significant financial consequences tied to early withdrawals from retirement accounts.