Divorce among older couples has become so common in recent years that the phenomenon even has its own nickname: “gray divorce.” According to a study by researchers at Bowling Green University, the divorce rate among couples age 50 and older has doubled in the last 20 years, with experts attributing the spike to anything from changing social mores to longer life expectancies.
Whatever the reasons, divorce after 50 can have a profound effect on a person’s finances, especially if the divorce was unexpected. Unlike younger couples who typically have many working years ahead in which to recover their economic stability after divorce, older individuals near the end of their careers may see their retirement assets reduced dramatically by divorce, often with little opportunity to make up for the loss.
To help ensure a fair division of retirement assets during divorce, the first step is to take a careful inventory of the couple’s accounts, which may include:
In most cases, a person’s 401(k) or other employer-sponsored retirement plan will be subject to division with his or her ex-spouse during the divorce process. In general, contributions made to either spouse’s retirement plan during the marriage are considered marital property and can be subject to division during divorce, while contributions made prior to the marriage are considered separately owned.
Although retirement benefits from a 401(k) or other employer-sponsored plan can be split with an ex-spouse during divorce, they are not necessarily distributed in the same manner as other assets in the property settlement. Instead, the court may issue a Qualified Domestic Relations Order, or QDRO, which gives the recipient ex-spouse a legal right to receive his or her share of the benefits directly from the plan’s administrator without incurring the early withdrawal penalty that may otherwise apply.
Because the legal requirements of a QDRO are very specific, an ordinary divorce settlement agreement will not necessarily be sufficient to protect a person’s right to receive benefits from an ex-spouse’s retirement account. Therefore, to help ensure a fair settlement of your retirement assets during divorce, it is important to seek legal advice from an experienced divorce lawyer. For more information about QDROs, or for help protecting your retirement assets during divorce, contact me online or by phone at 707-527-9900.