Divorce among older couples is becoming more common in Texas and across the U.S. In fact, while divorce rates have stabilized for all other age groups, it has doubled over the last few decades for people ages 50 and over. Unfortunately, this phenomenon, known as gray divorce, can wreak havoc on retirement plans if assets are divided up incorrectly.
People over the age of 50 are closer to retirement age. As a result, any financial mistakes made during a divorce can be harder to recover from. Meanwhile, many older couples have several 401(k)s, pensions, IRAs and other investments, making it more difficult to divide everything evenly.
Experts say that couples entering a gray divorce need professional financial, tax and legal advice to make sure they fully understand their financial picture. Too often, divorcing couples think they can split up their retirement accounts on their own or simply agree to divide everything in half. However, in order to divide 401(k)s, a qualified domestic relations order must be submitted to the plan's administrator. On the other hand, the division of IRAs must be written into the divorce decree and presented to the IRA custodian. As for pensions, each employer has different rules regarding how, or if, they can be split up. it should be noted that each type of retirement account has different tax rules, and thus it is essential to understand the tax implications of dividing each account.
People pf any age who are ending their marriage may wish to discuss their case with an attorney as soon as possible. An attorney could protect a client's interests throughout the process while negotiating a settlement agreement that covers all applicable divorce legal issues.
Source: Kiplinger, "Dividing Your Assets in a Gray Divorce", Mary Kane, Aug. 2, 2018