The divorce rate for those over 50 has doubled since 1990, according to the National Center for Family & Marriage Research. Divorcing seniors should understand that there are unique challenges to separating so close to retirement. In fact, a divorce could have an impact on a senior’s long-term financial security.
When crafting a divorce settlement, it is important to consider the tax implications of receiving an asset. For instance, a traditional IRA or 401(k) with $100,000 in it may be worth less than a brokerage account with $100,000 in it. This is because the money in the brokerage account will get better treatment compared to the money in the IRA or 401(k) that will be taxed as ordinary income when it is withdrawn.
The timing of the separation could also be critical when it comes to a gray divorce. If an individual has been married for 10 years, he or she may be able to base social security benefits on the former spouse’s work record. Those who wait until age 65 to complete a divorce might be able to get health coverage through Medicare as opposed to COBRA coverage or buying a policy through an exchange.
A divorce can be an emotional event in an individual’s life no matter when it takes place. However, it may also have financial ramifications as well. Therefore, potential divorcees may wish to talk to an attorney who could review their case based on its merits. This may enable the client to receive spousal or child support as well as a share of any joint retirement accounts that existed at the time of the divorce.