While the divorce rate for most age groups in America continues to plummet, for one demographic group, the numbers are on the rise: senior citizens. Divorce rates have doubled since 1990 for those over 50, Bowling Green State University’s National Center for Family & Marriage Research reported.
This is significant because divorcing affects individual’s finances. If you are about to retire and get divorced, you must take every precaution to protect your retirement assets and pensions.
You will need to have a thorough understanding of your retirement benefits, as well as those of your spouse. It’s impossible to reap the most benefits from any potential settlement without knowing what is at stake. The following tips may be helpful.
Create a post-divorce budget
Your funds may be halved, but that doesn’t mean that your expenses will be. You need to devise a budget to meet your expenses — and that can require a lot of fat-trimming. You may need to make some major lifestyle changes to accommodate your new circumstances.
Delay the divorce
While you may no longer be able to live under one roof, if you’re nearing some financial milestones, you might decide to separate and postpone the divorce until later. For instance, you must be married for a decade to be eligible for an ex’s Social Security benefits and Medicare eligibility doesn’t begin until 65.
Make a great deal
To make the most of the retirement benefits, you must be willing to compromise on other valuable assets. She wants the house to sign off on the pension? Let her have it. He wants the gun and wine collections and the cabin at the lake? It’s a done deal.
In many instances, retaining a property into the golden years is impractical and costly. Instead of fighting tooth and nail for a property that is expensive to maintain, you may be better off financially leveraging it for a bigger piece of the retirement pie.
Examine all options
The way your spouse takes their pension can affect your bottom line. If they choose the standard election and the pension owner dies during its payout, the ex will no longer receive a share.
However, a qualified domestic relations order (QDRO) can address these issues fairly and increase the payout you receive.
There are many issues to address with splitting up retirement accounts and pensions, so make sure you go into battle fully armed with all of the information you require.