Recent studies have shown that divorce is not something that only affects young people. Approximately one fourth of divorces that occur in the United States involve people who are over the age of 50. As an adult approaching retirement age considers divorce, he or she must understand how divorce impacts retirement accounts. Though younger adults also have to factor retirement funds into their divorce settlements, an older adult who is planning to use the funds in the immediate future often has more at stake. If you or someone close to you is considering getting a divorce prior to retiring, there are a few things that you must be keep in mind.
Expect to Lose Savings
No matter how skilled your attorney is or how well you have prepared for your divorce, it is best to expect to lose half of the savings you have accumulated for retirement. Typically, a married couple will plan for retirement together as they each make contributions from their salaries to various retirement accounts. Each partner becomes partially reliant on the money that is being saved for retirement, and once divorce proceedings are initiated, the nest egg a couple accumulates often becomes marital property. Retirement assets that are found to be marital property are then divided, and even though you might lose less than half of your savings, it is always best to prepare to surrender a portion of the money you have accumulated during the marriage.
Certain Rules No Longer Apply
Certain types of retirement plans are protected by federal law from seizure through lawsuits. These protections are meant to keep retirement plans safe from creditors, but they do not provide protection during divorce proceedings. During a divorce, an ex-spouse can obtain a Qualified Domestic Relations Order (QDRO) and use it to divide the account owner’s retirement assets between the owner, themselves, or other dependents. Using a QDRO to transfer funds allows retirement funds awarded during a divorce settlement to be transferred into another retirement plan often without tax penalties. Failing to prepare for the loss of certain retirement assets because you feel they are untouchable can be disastrous.
Postponing Retirement is a Possibility
After years of hard work, sacrifice, and careful planning, the idea of putting off retirement may seem unthinkable, but unfortunately for many older divorcees, it becomes a reality. Couples who have divorced often feel less financially secure regarding retirement and typically have less savings than their married peers. Through careful planning and financial management, retiring on time after a divorce is possible. However, it is equally possible that you may need to work longer than expected to recoup the retirement funds lost during a divorce.
Discuss All Options
Before you start to panic, it is important that you discuss all available options. A qualified divorce attorney is prepared to review your retirement accounts, go over your spouse’s accounts, and help you work towards a fair divorce settlement. With guidance and support, it is possible to minimize the damage a divorce can cause when it comes to financial goals or retirement plans. The attorneys at Vayman & Teitelbaum know that retirement is something most adults look forward to and we work hard to protect your retirement assets during a divorce. Contact one of our conveniently located Atlanta area offices today to schedule a consultation.
