How Divorce After 50 May Badly Affect Your Retirement Prosperity
Although it’s common knowledge that the rate of divorces in this country continues to climb, you may be surprised to know that this trend continues well past the age of 50.
It’s not just Millennials and Gen Xers who are declaring divorces more often. Just because you and your spouse have made it past 50, this doesn’t mean it can’t happen to you.
Divorce after 50 could still occur and, if it does, your retirement prospects may be severely altered. While there are plenty of money mistakes you need to avoid, the following should help explain why divorce after 50 is right at the top of the list.
Your Savings Could Become Fair Game
If you keep a joint savings account with your wife or husband, it could become severely depleted during a divorce proceeding or right before it. While there are many laws that can be used to keep this from happening, the legal system is far from perfect in this regard.
While you should keep your retirement savings in a Roth IRA and other favorable vehicles, you also don’t want to risk losing your savings because you’re going through a divorce after 50.
If that happens, you may be forced to tap into your retirement funds to cover your regular expenses.
Your IRA and 401(k) Aren’t Safe
As we just mentioned, IRAs are fantastic for retirement funds. However, that doesn’t mean that they’re protected in the event that you get a divorce after 50.
As you can imagine, handling both types of accounts can be quite the headache. However, much worse will be the amount you lose and no longer have for your retirement.
Sure, some spouses will agree who gets what, but this is hardly something you can rely on with any confidence. It will also depend on what state you file your divorce after 50.
Different laws apply to how to divvy up this money.
Pensions Are Vulnerable as Well
Many people wrongly believe that even during a divorce after 50, their pension – if they’ve already received it – will be safe. Unlike other retirement saving vehicles, there’s no argument that the worker earned said pension on their own and it’s even issued by their company.
This is an unfortunate misconception that you’ll learn about the hard way if you get a divorce and have a pension. Typically, what happens is that you have to buy your spouse out.
The pension will most likely be analyzed for its perceived worth. Then, you can either pay them the portion they are deemed owed or it can come out in property allocation.
However it gets done, the point is that your retirement failsafe, the reliable, time-tested pension, will also be shrunk if you get a divorce after 50.
Social Security May Also Be Affected
Speaking of retirement standbys you may feel comfortable are untouchable, there’s a very good chance that if you get a divorce after 50, your Social Security will not go untouched either.
The only law that really applies here is that you have to have been married for at least 10 years. As long as that prerequisite is met, the Social Security checks can be divvied up.
Keep in mind, too, that if you’re close to that mark, a good divorce lawyer can slow things down sufficiently to ensure the marriage lasts the required 10 years.
If you’re within six months of the threshold, it’s almost guaranteed that your spouse’s attorney could make the marriage meet this criteria and gain leverage on your Social Security.
Consider Your Children
It’s always important to think about your kids during a divorce, but for the sake of this piece, we’re looking at the financial reasons why. If you get a divorce after 50, your children may still be in high school.
Having them live in two different places is going to come with a number of bills. You could be judged responsible for some form of child support too. This would, undoubtedly, affect your ability to save for a comfortable retirement.
Even if your child is grown and out of the house, if you’ve been supporting them in any way, this is going to take a much larger toll on your finances now that you’re divorced.
A common example is if your son or daughter is still in college. You may have to have a tough conversation with them about taking out a loan or cut back on your own spending to keep paying their bills.
Divorces Are Expensive
A big part of planning for retirement is anticipating the many obstacles that could stand in your way. Insurance helps with this to a large degree, but you also need to think about other events that could tax your finances.
Most people never consider that divorce could happen to them. They definitely don’t think about divorce after 50. Divorces aren’t cheap either. While there are definitely exceptions to this rule, the older you get, the more you can expect to pay when it comes to a divorce.
Aside from the many assets you stand to lose to your spouse, you’ll also need to pay more to your lawyer as they’ll have to spend proportionately more hours on trying to protect your best interests.
As a result, your finances may not be adequately prepared to handle the impact of this kind of cost. Again, the end result of divorce after 50 could very well mean that your retirement funds take a serious hit.
I’ve covered before how it’s best for couples to save for retirement together. Sadly, couples don’t always stay together. If this happens to you, your financial situation will most likely suffer quite the impact.