Divorce and Retirement After 50
Marriages end for a variety of reasons and at various stages. First marriages last for roughly seven years, hence the term “seven-year itch.” Others last for 10, 15, or 20 years. Marriages ending after 20 years used to be an anomaly, but it has become increasingly common since 1990.
Divorces past 50 have been a growing trend for the last decade, and it’s a concerning situation. Indeed, divorcing after age 50 can really do a number on one’s finances. At a time when you should be saving as much as possible for retirement, a divorce forces you to split assets and double living expenses — a true double whammy.
After a long marriage, most of a couple’s wealth involves assets acquired together over the years. How those assets will be divided depending on where you live. In states such as Florida, marital assets are to be divided equitably, which gives courts considerable discretion in deciding what’s fair. In Florida, though, there are new laws allowing Community Property Trusts. These allow married couples to convert their property into community property.
Divorces that occur later in life come with their own complications. You and your spouse may have multiple sources of retirement savings, and you will no doubt be concerned about their size and how soon you will need them. Another thing to consider is that these assets are typically governed by their own rules regarding how they can be divided in a divorce.
For example, asset division can be tricky based on the type of retirement account you have.
By law, 401(k)s and individual retirement accounts (IRAs) can have just one account holder. However, the money that goes into these accounts during a marriage technically belongs to both parties. As part of the divorce settlement, the spouse who has more retirement funds may need to transfer money to the other spouse’s account.
This is done by filing a qualified domestic relations order (QDRO), which outlines how the money is to be divided. Keep in mind that the most tax-efficient method for the recipient spouse is to roll such funds directly into their own retirement account. The recipient spouse can also qualify to have some funds distributed directly given directly to them for immediate expenses. While this method would be exempt from the 10% early withdrawal penalty for those younger than 59½, there is still a 20% federal tax to consider.
In short, get all the help you can. You’ll want the help of your financial advisor, an accountant, and an experienced lawyer well-versed in state-specific laws. Divorce is complicated as you get older, and there are a lot of different ways you can approach it. In addition, these rules are constantly evolving.
Seek Legal Help
When divorce happens later in life, it can affect future plans, such as retirement. Money and assets are split up, making it harder to save up and plan.
A divorce at any time can be overwhelming. Get the help you need from a Fort Lauderdale divorce lawyer Edward J. Jennings, P.A. We help clients through Florida divorce matters throughout Broward County. Schedule a consultation by calling 954-764-4330 or filling out the online form.
Source:
schwab.com/learn/story/divorce-after-50-impact-on-retirement-savings
