How Divorce Can Affect Your Retirement Benefits

Last week, we discussed how divorce affects Social Security benefits. Couples over 50 years of age who considering divorce must also think about how splitting up will alter their plans for retirement. A study conducted at Bowling Green State University found that 14 percent of divorced men, and nearly one-third of all divorced women, at least 62 years of age have incomes at or below the federal poverty line.

Divorce Rates On The Rise

The Bowling Green study also found that divorce rates for couples 50 and older is rising. The study found that divorce rates for couples in that demographic had doubled from 1990 to 2013. Researchers have labeled the phenomenon “the gray divorce.” Although divorcing couples at that age typically do not have to deal with assigning custody of minor children, they also frequently encounter higher levels of financial stress from job displacement, decreasing employment opportunities, and rising medical expenses.

Divorce And Retirement Benefits

Since many older couples contribute to retirement plans, such as pensions or 401(k) plans, the mechanics of splitting up the marital assets becomes more problematic. While many couples at that age focus more on paycheck-to-paycheck issues, the issues surrounding retirement benefits often go ignored. Howard Phillips, author of “Dividing Retirement Plan Assets in a Divorce,” said that most older couples seeking divorces put their retirement plans “below the house and jewelry” when splitting their assets.

Rules For Dividing Retirement Benefits After Divorce

The Social Security Administration has published clear rules for the parsing of Social Security benefits for divorced couples, the rules for splitting retirement benefits after divorce are not always clear. Each state has different rules on how couples can split their retirement benefits after divorce. Also, couples must understand if their shares of a retirement plan are based on a spouse’s contributions throughout the life of the account, or if they are based only on those contributions made during the marriage itself.

Source: Chicago Tribune

Get Answers For Your Divorce and Retirement Questions

To find out how we can answer your questions about divorce and retirement, contact one of our attorneys today. Our intake team will take down the details of your case and quickly connect you to an attorney who understands how divorce and retirement can affect your financial future. You can also fill out the “Free Case Evaluation” form at the top of this page.