In recent years, there's been a lot written about the surge in divorce rates among older couples. For individuals nearing retirement age, divorce may produce anxiety over financial stability. Of particular concern for those over the age of 50, is whether they will have enough money to retire when they want and live out their retirement years as planned.
A recent U.S. study conducted by ING found that divorced individuals often have more anxiety and fears related to retirement and being financially secure. It turns out, such fears may be warranted as divorced individuals have saved an average of $11,000 less than their married counterparts.
While divorce at any age can result in an individual taking a financial hit, there are ways those nearing retirement can help ensure retirement plans remain intact even when a marriage doesn't. For example, many divorcing men and women may believe that a family home is their most valuable asset and therefore worth a fight. In many cases, however, other assets such as those distributed in a 401(k) or IRA account are far more valuable and readily accessible.
When considering the division of retirement assets, it's also important to note that not all retirement accounts are created alike. On paper, assets held in a Roth IRA and 401(k) may appear equal in value. When you take into account how each are taxed, however, the Roth IRA is actually more valuable.
In addition to figuring out the most valuable assets in a divorce, divorcing individuals are also advised to take advantage of special allocation provisions of those assets. For example, an individual who is receiving monies from an ex-spouse's retirement account may want to roll the funds directly into an IRA. Using a document known as a qualified domestic relations order, this individual can take money out of the IRA without being penalized.
As with most divorce matters, those pertaining to retirement assets and accounts are often complex. It's advisable, therefore, that individuals over the age of 50 retain a divorce attorney who has experience handling similar divorce matters.
Source: The Huffington Post, "4 Divorce Mistakes That Can Derail Retirement," Marilyn Timbers, Aug. 27, 2013