For divorcees age 50 and older, funding retirement must be a top priority
For many working people, retirement is revered as a long-awaited and anticipated time when the pendulum finally shifts from the repetitive nine-to-five grind to a time of freedom and exploration. At least, in theory, that’s how many working adults envision their retirement years. In reality, however, a life of leisure spent traveling and golfing isn’t in every retiree’s future and statics show that this may be especially true for men and women who divorce later in life.
While an individual’s retirement plans can be negatively impacted by numerous types of financial missteps and setbacks during one’s life, divorce is among the most significant. Today, the negative effects of divorce on retirement funds are more pronounced as a growing number of individuals age 50 and older are choosing to divorce. In fact, a study conducted by Bowling Green State University revealed that, between 1990 and 2010, the divorce rate among individuals in this age demographic doubled.
Thankfully, there are steps that an individual who goes through a divorce later in life can take to protect his or her retirement dreams. For example, it may seem like a good idea to fight for and retain a previously-shared home. In many cases, however, the costs associated with keeping a home prove to be too burdensome. It may, therefore, be best to sell a home and split any profits with an ex-spouse. By downsizing to a smaller home or apartment, an individual can potentially save hundreds of dollars each month, some of which can be used to make catch-up contributions to a 401(k) and IRA.
During the divorce negotiation process, it’s also important to remember that even assets that, on paper, appear to be equal in value may be taxed differently and therefore valued differently. When considering a soon-to-be ex’s divorce settlement offer, it’s crucial to review how certain accounts, investments and real estate are valued as well as the tax penalties associated with each.
Divorce signals many changes in an individual’s life, including those of a financial nature. For individuals who are nearing or in retirement, a divorce attorney will work to negotiate a settlement that can help one achieve his or her retirement goals.
Source: Time, “Don’t Let Divorce Derail Your Retirement,” Carla Fried, March 3, 2016