Although divorce rates in the United States have fallen to a 35-year low according to the National Center for Family & Marriage Research at Bowling State University, it’s a different story for adults ages 50 and above.
For older Americans, divorce rates have doubled since the 1990s, with 10 in every 1000 married individuals having divorced in 2015—up from 5 in the early 1990s. It gets worse for older baby boomers (ages 65 and up), where divorce rates have tripled since the 1990s—around 6 in every 1000 married people.
Such separations are often referred to as “gray divorces.” While they may not seem different from any divorce at a younger age, gray divorces come with unique concerns, mostly having to do with your finances.
Danger to Retirement
One thing is for sure: when a gray divorce becomes part of anyone’s financial equation, it can put the retirement of both parties in danger. For starters, both spouses may be forced to live on only half the income they would normally have, leading to some uncomfortable lifestyle changes.
This is especially dangerous for homemakers who have been out of the workforce for years, and must now deal with the potential of finding a job even with alimony.
If there’s a silver lining to these divorces, it’s that spouses usually don’t have to deal with bitter custody battles. At this age, their children are likely to be adults and have their own families.
Expect a QDRO
A gray divorce usually leads to the division of whatever money the couple shares in 401(k) plans, retirement accounts, 403(b) or 457 accounts, and pensions. This usually requires an expensive Qualified Domestic Relations Order (QDRO).
Some points on QDROs to remember include:
For non-IRA retirement plans, you will need a QDRO to divide whatever money is in these accounts. Otherwise, you might end up paying taxes when moving any amount to your ex-spouse improperly.
Work with a divorce attorney who knows how QDROs work. This is a specialty not all divorce attorneys are experts in.
An improperly filed QDRO will be sent back to you, which means having to start all over again and paying the QRDO fees once more.
How Do You Avoid these Issues?
Of course, the most obvious solution is to simply not go through a divorce at this age. But while this may seem like the most practice choice for couples to avoid splitting their assets and retirement funds, money is not always the concern for these people. Personal happiness and independence are just as, if not more, important for couples of any age.
Careful financial planning also goes a long way if you want to insulate your finances against marriage problems. Just as people would adjust their lives and portfolios before retirement, it would be wise to prepare contingencies for unexpected separations in your golden years.
If you, or a loved one, are going through a gray divorce, schedule a consultation with family law attorney Daniella Lyttle to discuss your financial and legal options. Call the Lyttle Law Firm today to find out how we can help you.