Keeping retirement plans in mind can help ensure a better divorce outcome
The first few months of the new year are sometimes referred to as ‘Divorce Season’ because of the increased number of couples who inquire about or file for divorce during this time. The increase is largely due to couples attempting to stay together through the holiday season for the sake of family and friends finally calling it quits. According to the Chicago Tribune, the early months are an especially popular time for Baby Boomer couples to divorce because younger couples with children, by contrast, usually choose to divorce after the school year ends. Given that more older couples are likely to be looking into divorce at about this time, it is important for them to keep in mind how divorce may impact their retirement plans.
Gray divorce boom
Baby Boomers, of course, don’t just divorce at the beginning of the year. As Bloomberg points out, the gray divorce boom has become a fact of life for an increasing number of American families in recent years. Nowadays, about a quarter of all divorces are classified as a gray divorce and older Americans are approximately twice as likely to divorce today than two decades ago.
But there are huge risks to divorcing later in life. Poverty rates tend to be much higher for older single people, especially women. Furthermore, the unpredictable nature of divorce can end up squandering one’s retirement assets, leading to anxiety and financial strain later on.
Looking towards retirement
While the situation is changing, one of the big mistakes that people make going into divorce is overlooking pensions and other retirement accounts. In many divorce, assets like the house, vehicles, and other property that may have a more immediate impact on a person’s life tend to get the bulk of a couple’s attention. Furthermore, pensions simply don’t have the same sentimental value as, say, a home or car.
Yet experts point out that for many older couples a pension is likely to be their most important asset. A pension is not only a large asset, but it will help provide a long-term source of income throughout retirement. Pensions, however, are not like other assets. While pensions can usually be divided between both spouses, they require special legal and administrative considerations, such as a qualified domestic relations order (QDRO). Such special considerations may be complex and difficult to understand, but they can have a significant financial impact if not followed closely.
Dealing with pensions and other significant assets during divorce usually necessitates the guidance of an experienced family law attorney. Due the complexities of property division in divorce, an attorney is often of invaluable help in making sure his client’s assets and property are protected when faced with the challenges raised by the end of a marriage.