Statistics show that more Americans are getting divorced nearer to retirement age. It’s important to note that these “gray divorces” can present unique considerations for the spouses involved. Instead of child custody, this age group may be concerned about losing half of the assets they have spent a lifetime building. Annuities can be particularly complicated to divide, and some couples in Colorado may opt to trade them for other assets since they could lose value when split.
For a 401(k) or pension plan, a document called a qualified domestic relations order is necessary. Pension plans also have additional rules associated with them. IRAs do not require QDROs, but they do have certain rules that need to be followed. Rolling 401(k)s and IRAs into a new IRA can prevent taxes and penalties. When assessing the value of these accounts, soon-to-be exes should also account for taxes on distribution or other fees.
Some couples opt for a collaborative divorce. In this situation, each person has an attorney, but they may share financial professionals who help them work toward individual goals. For example, some spouses might prefer to take cash assets over retirement savings. A couple might also work out an arrangement in which one pays support to the other until that spouse can begin drawing on the higher-earning spouse’s Social Security benefits.
Older people who are considering divorce may want to retain legal representation. A lawyer could help a client understand how a divorce will change their retirement plans and what financial adjustments may be necessary. In some cases, one spouse may not have worked outside the home for many years. That person could receive spousal support but may also have to return to the workforce.