How Divorce in Later Life May Impact Retirement
July 13, 2015
When the current generation of seniors was growing up, only 2.8% of Americans over the age of 50 were divorced. Expected lifespans were shorter and people stayed in their marriages longer. Since then, however, increased longevity has been proven to lead to a higher divorce rate. While divorce on the whole has declined in the last decade, for couples over the age of 50 the divorce rate is climbing.
A study conducted at the National Center for Family & Marriage Research at Bowling Green State University showed the divorce rate for older couples has doubled since 1990. Instead of custody battles and child support, these divorcees face questions of financial stability in retirement. After attorneys, financial planners and taxes, divorce costs can cripple retirement plans.
Sociologists have labeled this group “gray divorcees,” and their concerns are unique. Many women of the Baby Boomer generation dedicated themselves to their husbands’ careers. A fair divorce settlement for these stay-at-home Moms is the only way to secure a retirement.
Divorce in Later Life: What Indiana Seniors Should Know
Experts suggest hiring a financial planner before seeking counsel from a divorce lawyer. Remember, dividing these assets between two people can mean less money for each after they’re taxed. It’s important to know what you have going in.
Senior couples who get divorced must navigate tricky retirement obstacles. A lengthy period of jointly accumulating assets causes messy financial separations. Older adults getting divorced face the loss of their Social Security, pension plans and IRAs.
- Pensions and Divorce
In today’s workforce, pensions are on the verge of extinction. However, many of those currently considering retirement are fortunate enough to own one. You may choose to start by assessing its value.
Pensions are valued through a process called, actuarial analysis. Typically this is done when a portion is earned before marriage. After an analysis, the couple can determine to what portion the non-participant has access. Or they are split by an agreed upon ratio.
- Other Savings & Investment Accounts
Balances on IRAs and 401(k) accounts are a bit different. These are based on the accrual of assets that fluctuate in value. Your 401(k) may be worth “X” amount of dollars at the time of the agreement and “Y” by the time it is harvested.
Finally, if you pay into Social Security, your spouse likely has a claim to those benefits. A marriage lasting ten years or more avails spouses to one another’s benefits. If your marriage falls short by even a few months, you do not qualify.