DIVIDING RETIREMENT ASSETS IN A ‘GRAY DIVORCE’

Sometimes a couple could be married for decades, and then one day find that they have simply grown apart over the years. When these gaps become insurmountable, the couple may consider ending their marriage. The Pew Research Center reports that, since the 1990s, the divorce rate has increased two-fold for U.S. adults age 50 and up. Known as a “gray divorce,” older adults who are divorcing may not face the exact same issues that their younger counterparts do. For example, with their children being grown adults, they do not have to worry about child custody or child support. One thing they do need to pay attention to, however, is how they will divide retirement assets.

For example, Social Security benefits are not part of the marital estate. However, if a couple is married for at least 10 years, one spouse can still collect payments on the other spouse’s record, if the first spouse is at least 62-years-old, is not married and whose personal benefits are less than those of the second spouse.

However, pensions are generally included in the marital estate. Thus, couples will need to decide which one of them will retain the plan. Some employers offer a one-time pension payment, so couples will need to determine how they want to handle such a lump-sum payment if one is offered.

There are specific property division rules when it comes to dividing other retirement accounts, such as a 401(k). If the right procedures are not followed, it could have negative tax consequences and could result in further problems. Thus, those with questions about dividing retirement accounts may want to seek professional guidance.

In the end, divorcees who are near retirement age or who are already retired will face issues that younger divorcees may not. Retirement, specifically, will be a major issue to address, especially if one or both spouses have left the workforce. Funding one’s retirement as a single individual after years of marriage can present challenges. However, with the right help during the property division process, spouses can split their retirement assets in a fair and appropriate manner.