Retirement is often envisioned as a golden period of life, a time for couples to relax and enjoy the fruits of their labor together.
However, this transition can introduce unforeseen challenges for some, leading to marital strife and even divorce. Late-in-life divorce, often called “gray” divorce, is on the rise, with 10% of all divorces now involving couples aged 65 and older, according to the American Bar Association.
In such cases, teams must grapple with not only the emotional aspects of separation but also the complexities of dividing assets and planning for life after divorce.
One of the central concerns when it comes to divorce, especially in retirement, is how to divide assets that have been accumulated over the years.
The rules governing this division can vary depending on your place of residence. In community property states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, the law mandates an equal 50/50 division of all assets.
In contrast, common-law states require assets to be divided equitably, meaning both parties must agree to a fair split, which can be more complicated than a simple 50/50 division.
To navigate the complexities of dividing assets, many individuals seek the assistance of a divorce attorney, although it’s essential to be prepared for associated costs.
Retirement Savings: IRAs and 401(k)s
Retirement accounts like IRAs and 401(k)s can pose unique challenges during divorce proceedings.
Although your name may be on the account, your spouse may still be entitled to a portion of your savings. For 401(k)s, both parties often need to file a qualified domestic relations order (QDRO) in their home state, outlining how the retirement savings will be divided.
In the case of IRAs, no QDRO is needed, but an agreement between both parties is essential before initiating a direct rollover to the former spouse’s IRA.
This process is financially complex and requires careful attention to tax implications.
Dividing Social Security benefits and pension payments can also present challenges. Social Security payments may change post-divorce, as you could be entitled to a portion of your former spouse’s help and vice versa. Specific eligibility criteria apply, including having been married for more than ten years and your ex not remarrying.
Contacting your local Social Security office or consulting a divorce attorney can guide you on how to navigate this situation.
Pensions, conversely, can be trickier to divide due to state regulations and plan rules. While you may have earned the retirement, your former spouse might be entitled to a portion, primarily what was made during the marriage.
In some cases, a compromise on another asset may be a practical solution.
Source: Yahoo News