Gray divorce is on the rise, according to the National Center for Family & Marriage Research. According to this organization, the divorce rate in Florida and across the United States for individuals over 50 doubled between 1990 and 2010. Additionally, the United States Census Bureau reported that 11 percent of men and 15 percent of women between the ages of 65 and 75 had at least one divorce under their belt in 2010. Individuals who get a divorce later in life may have specific financial concerns to consider.
One of the most significant assets for individuals in this age group is a retirement account. However, one study found that 31 percent of individuals surveyed who had divorced said they did not claim a share of their spouse’s retirement account and did not even know they could. Even if a spouse had a retirement account upon entering the marriage, the other spouse may be entitled to half of the increased value of the account. A Qualified Domestic Relations Order can help prevent individuals from owing taxes if a transfer is made from one spouse to another due to divorce. Additionally, getting retirement benefits rather than alimony is preferable because the latter is taxable. Experts suggest that it is best for individuals to roll over these benefits into an IRA to avoid penalties for withdrawing the funds.
Older spouses who spent years out of the workforce to raise families may be at a particular disadvantage. These individuals may wish to discuss their situation with a financial planner before getting a divorce so that they can learn about their entitlements during the divorce. While many spouses may wish to retain the family home, this may not be the most logical choice.
Individuals who are considering the financial ramifications of getting a divorce may choose to test the waters by speaking to a divorce lawyer first. He or she may be able to offer recommendations about which assets they should try to claim and their rights under community property laws.
Source: Forbes, “The Big Money Mistake Divorcing Women Make“, Kerry Hannon , July 03, 2014