Issue of retirement funds more pressing for divorcing Baby Boomers
Preparing for retirement is important for many people, but especially so for those who actually plan to retire within the next couple years. Therefore, it may come as a surprise that divorce rates for older Americans are soaring. The gray divorce trend has grown so quickly in recent decades that about a quarter of all divorces now involve a spouse who is over 50, according to Time. Given that trend, what to do with the retirement funds during divorce is becoming a pressing issue for a growing number of people.
Can retirement funds be divided?
Retirement funds are treated as part of a couple’s marital property, meaning they can be divided between both spouses just as any other marital asset can. Even if a retirement account is only in one spouse’s name, the other spouse usually has a right to half of that account.
However, as USA Today points out, divorcing couples should not simply assume that a family court or judge will automatically divide such retirement funds equally between both spouses. While retirement accounts may be considered marital property, they are also treated somewhat differently from other types of marital property. In many cases a Qualified Domestic Relations Order (QDRO) may be required to complete the division of retirement funds. A QDRO can help avoid some of the taxes and fees that a person would otherwise incur for trying to divide a retirement account.
Finding the funds for retirement
The issue of dividing retirement accounts points to a bigger concern: how divorcing older couples can be expected to fund their retirements overall. Divorce can have a big financial impact, and given that people in their late 50s aren’t likely to have many years of employment left to rebuild their funds, it is extremely important to make sure that a divorce does not leave them unable to afford a comfortable retirement.
Other property not strictly considered a retirement fund, such as the couple’s home, could still have a significant impact on a person’s retirement plans. In some cases, for example, it may make more financial sense to give up one’s half of the marital home in exchange for keeping all of the retirement funds. In a limited number of situations, the reverse might be true.
Legal advice
Of course, every divorce is unique, especially when people are trying to protect their own dreams and visions for an enjoyable retirement. Ensuring divorce does not leave one financially disadvantaged, however, is a concern for most people. By talking with an experienced family law attorney, people going through divorce who have concerns about how that divorce may affect their retirement plans will have the guidance they need to approach this important moment in their lives confidently and intelligently.
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