There is no doubt that priorities during divorce change with age. While those under 50 panic about child custody and spousal support, being over 50 brings in a new set of fears. One may worry about compromised retirement savings or relying on a spouse's savings for his or her own retirement only to find him or herself without that reassurance.
Here are the effects that divorce can have on retirement, social security, and investments.
Employer-Provided Retirement Benefits may be Divided
The division of retirements is more likely if only one spouse remained employed throughout the marriage. A QDRO, or Qualified Domestic Relations Order, is a document that transfers a share of one spouse's retirement benefits to the other spouse. This creates two separate accounts, one for each spouse.
Avoiding division depends on a present day evaluation buy-out. A spouse without retirements benefits takes the value of his or her interest and trades it for an asset of equal value, including homes, cash, or non-retirement stock investments. If this is an option, the first step is to get a professional actuary to value the retirement account.
Social Security, Military Benefits, and Workers' Compensation are Not Normally Divided
Even community property states consider social security, military benefits, and workers' compensation payments single assets. If you are receiving income from any of these programs, they will likely remain yours alone. However, any spousal benefits arising from social security or the military will no longer be payable to you or your former spouse when the divorce concludes.
Keeping Money-Draining Assets can Derail Retirement
It may seem like a good idea to insist on keeping a home, an underperforming stock, or land holdings in a divorce, but all of these have the potential to cost you money in the long run. If you are looking at retirement but still have a home with a mortgage that could require repairs, it may be better to rent an apartment. Stocks can fluctuate and the risk of keeping them may not be worth it. The same is true with land—if you have a likely buyer and can liquidate that asset, take advantage of the opportunity, rather than waste time and money on maintenance or having to hire a realtor later.
Divorcing at a time when you are looking forward to retirement more than you are concerned with funding your kids' college educations means taking different considerations into account. Your goal is to come out of the divorce with your retirement intact. By understanding these possible complications, you can make better decisions and have more productive discussions with your attorney.
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