The Impact of Divorce on Retirement Plans

Imagine that you work hard for the majority of your life, steadily building a retirement fund that will allow you to travel and enjoy your elder years without financial concerns. You also spent those years married to the person you thought you would be with forever. Raising a family, buying and selling real estate, taking vacations and making memories together for 30 years. Then, suddenly, it all falls apart. Your spouse of 30 years tells you they want a divorce. Just like that, you are in danger of losing half of the retirement funds you worked so many years to save.

This scenario is becoming more and more common in today's society. Late in life divorces are happening at higher rates than ever. When younger couples get a divorce, they likely have not been building on a retirement plan for long, and will have many more years to rebuild. However, when older couples choose to go their separate ways, they do not have the luxury of time on their side. There will not be enough years left to regain what they will lose financially in the divorce.

Any older couple considering divorce should consult with a divorce attorney. When there are retirement plans to be considered, he or she can help prepare what is known as a domestic relations order. This will allow the parties to avoid paying penalties or taxes that would normally be assessed if retirement funds were withdrawn early, or prior to full retirement age. It is of utmost importance, especially in cases where there are a substantial amount of funds to be disbursed. If a domestic relations order is not completed, one or both spouses could end up paying massive sums in taxes.

Late-in-life divorces, also known as "grey divorce", brings its own set of complexities, aside from usual divorce issues. A knowledgeable attorney can help navigate these with ease, and help both parties carry out the remainder of their lives in peace and happiness.

Tags: High Asset Divorce