Divorce can be a very stressful thing to go through at any age. But for couples approaching retirement, it can cause added worry about the future.
During an Illinois divorce, all marital assets — including retirement accounts — must be split equitably between the parties. That means some individuals could end up losing up to half of their retirement savings.
For people nearing retirement age while going through divorce, there isn’t much time to make up for lost retirement savings, so downsizing may be the only option.
That’s what a 61-year-old businessman from the Midwest told the New York Times he had to do after his divorce four years ago. He said the “financial belt needed to be tightened” when his plans of a shared retirement with his wife of 30 years didn’t pan out.
This is a scenario many Americans over the age of 50 are finding themselves in as divorce among this demographic has increased dramatically in recent decades.
In fact, according to the National Center for Family and Marriage Research at Bowling Green State University, the divorce rate among people 50 and older has doubled since 1990 and will continue rise as the baby boomer generation ages.
What makes retirement issues especially onerous in these “gray divorce” cases is that judgment is often clouded by emotions. Stress and depression are common among people going through divorce and can complicate the settlement process.
In some cases, spouses simply walk away from assets that they are entitled to because they don’t want to deal with the divorce process anymore. But this can cause serious financial problems when it comes time to retire.
In order to best protect retirement assets during divorce, experts advise working with an experienced family law attorney and fighting for a fair settlement. Additionally, it’s important to remember that while divorce is an ending, it’s also a beginning.
Source: New York Times, “Retirement Plans Thrown Into Disarray by a Divorce,” Constance Gustke, June 27, 2014