Many older Americans who split up will end up dividing retirement accounts at the end of the marriage.
People live longer and social mores about divorce have relaxed, says Bari Weinberger, a family lawyer with the Weinberger Law Group in Parsippany, New Jersey. Now, older people seek divorces. She adds that more women exit their marriages after their children are grown because they feel more financially independent and secure.
While on the surface divorce over 50 may seem simpler in some ways because the children are grown and on their own, financially, that’s often not the case.
Divorce can be different financially – and more difficult – for older people, who can see the value of pensions, IRAs, 401ks, and Social Security benefits affected. Money stashed away in these retirement accounts now ends up on the negotiating table. What looked like a secure retirement for two seems more precarious when the marital pie is cut in half.
“There is less time to plan for retirement, and their retirement assets may be divided as part of a divorce,” confirms Weinberger.
Social Security payouts are available for most people when they turn 62. If one spouse worked and accumulated Social Security, the financially-supported spouse could be entitled to a division of those benefits on divorce. “The financially-supported spouse should write to the Social Security Administration to get an official statement detailing what their entitlement will be, based upon their spouse’s benefit,” suggests Ms. Weinberger. “[Stay at home wives] need to be even more aware of what their Social Security entitlement will be and what kind of annual or monthly budget gap will need to be filled when deciding settlement options,” she adds.
Social Security accounts become even more important if there are minor children. The older divorcing couple will need to take into account the retired parent’s Social Security benefit when calculating child support, she says.
The divisions of pension and individual retirement accounts (IRAs) can also affect what the divorcing couple plans to do regarding the division of the rest of the marital estate. The couple must consider “whether there will be an alimony obligation and how they will account for that monthly budget item after their retirement,” Weinberger says. “They may be more willing to provide the supported spouse with a larger portion of their retirement accounts, or leave the spouse’s retirement accounts alone if they can bargain a finite – as opposed to “permanent” – alimony obligation.”
“They may be more receptive to selling the marital residence in order to free up cash since the children are grown and they may not need or want the space,” she notes. “In my experience, the younger the couple, the less concerned they are about the division of the retirement assets and the more inclined, if there are young children, to try to stay in the residence to minimize disruption to children.”