In recent years, many people over the age of 50 have filed for divorce. As the curve leans toward older Americans divorcing more often than younger Americans, it’s important to think about the ramifications of divorce on finances at different stages of life.
One reason many prefer later-in-life divorce is that the children are now adults and it’s easier to make such an emotional change. A downside, however, is that most workers have reached their career peak and their retirement savings are established at this point, with the intention that two people will share the total sum and not split it down the middle.
Retirement accounts and unexpected expenses
“Gray divorce” is a term used for those who divorce at 50 or older. If you’re considering divorce at this age, you’re likely aware of your overall financial situation and some of the changes you’ll face, but it’s important to consider some of the finer details. For example, there are often tax penalties or fees for transactions on retirement accounts. Other financial factors can include support for adult children, how alimony might affect the overall picture, and how much will be spent on legal fees during the divorce itself.
A recent Washington Post column on money and divorce explores this in more depth, offering tips for anyone who may be considering divorce as they near retirement age. The most important, it says, is to make sure that retirement accounts are managed by a Qualified Domestic Relations Order (QDRO) during the divorce. QDROs are legal orders specific to retirement accounts, which means you’ll pay fewer penalties for making account changes. The article also stresses diversification. The house may be valuable, but sole ownership gives added responsibility and liability beyond its listing price.
Protecting the nest egg for a comfortable retirement
Every stage of life has unique challenges. While you may not be chasing toddlers around the house or striving for another big promotion, many of life’s goals after age 50 point to a nest egg for the non-working years ahead of you. Divorce will undoubtedly affect those savings. Because of the complex nature of retirement financial plans, an experienced family law attorney may be able to offer advice to help you prepare for changes to those long-term plans.