Gray divorce: Protecting the retirement benefits of each spouse

Getting divorced as a relatively young couple has its hardships and risks. This includes disputes over child custody. Individuals who are just beginning their careers may also have a difficult time affording their current lifestyle without their spouse’s added income.

Many of these issues go away or become less prevalent as couples get older and as their children move out of the house. But divorce later in life – often called “gray divorce” – has its own unique challenges. For many couples, the biggest risk in getting divorced after age 50 is the loss of significant portions of their retirement savings.

Divorce later in life seems to be correlated with an increased risk of poverty. Research shows that among divorced women age 62 and older, 30 percent (who stayed single after divorce) are living at or below the federal poverty line. Among men in this same demographic, the at-or-below poverty rate is 14 percent. This is in comparison with married couples of the same age, who have poverty rates of just 4 percent.

Many family law and financial professionals agree that couples going through a gray divorce need to focus on two outcomes: A speedy and amicable divorce and an equitable distribution of retirement assets.

In any divorce, significant disagreement costs time, and time costs money. Most older couples cannot afford to battle over division of assets and other aspects of their divorce. The faster terms are settled, the less money the divorce process will cost.

An agreeable solution is often also a mutually beneficial one. You may want to make retirement assets your first focus in negotiations, including working with your attorney to draft a Qualified Domestic Relations Order. The goal is often to divide retirement assets equitably with legal documents that are thorough and specific.

If handled correctly, gray divorce does not have to put either spouse’s financial future in jeopardy. Rather, it should ensure that both spouses can afford to retire in relative comfort.

Source: The Chicago Tribune, “How divorce after 50 may affect your retirement savings,” Janet Kidd Stewart, Feb. 2, 2015

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