Retirement and divorcePeople in their 50s and 60s are often looking forward to a relaxing retirement during which they can travel, read, or just enjoy some well deserved down time. Gray divorce, however, can throw such plans into disarray. In addition to the emotional and family toll, divorce always entails some form of financial reevaluation in a person’s life. Expenses tend to be higher for people supporting themselves on one income than for married people who can split expenses.Further, once a divorce is finalized, people will usually have very few years available to rebuild any accounts that were depleted by a contentious divorce. Some people may even have to postpone their retirements in order to live comfortably in their golden years.Retirement benefitsOne of the central issues in a gray divorce are retirement assets, like pensions and other retirement funds. Such assets often are not properly valued in a divorce, despite being the most valuable property in many marriages. For example, as USA Today reports, many people assume that the marital home is a couple’s most valuable asset, but such property is subject to taxation, upkeep costs, and real estate market volatility. In contrast, although retirement plans are tax affected, a diversified retirement fund can prove a much more significant and reliable long term asset.
Such assets, however, are treated differently by family courts than other types of marital property. While most retirement funds can be divided between both spouses, regardless of whose name is on the account, they will require what is called a Qualified Domestic Relations Order (QDRO). A QDRO is specific to retirement accounts and will help ensure that a spouse’s right to a portion of those accounts is upheld by a court. A properly prepared QDRO also assures that a martial transfer of retirement assets from the employee spouse to the non-employee spouse is not subject to taxation.
Because retirement benefits are treated differently in family court, people who are in the process of divorcing should know specifically how to protect these important benefits. Failing to rely on professional legal advice during a divorce, especially in a gray divorce, can have financial repercussions that can last well into retirement. An experienced family law attorney can help clients understand how a divorce may affect their retirement and what steps can be taken to ensure a retirement plan is not unduly compromised by a divorce or other family law concern.