More gray divorces puts spotlight on dividing retirement funds
Many couples go into a divorce unaware that pensions can be divided
With more senior couples divorcing, the issue of dividing up retirement funds is becoming increasingly important. According to Forbes, many people, especially women, go into divorces not aware that they have a right to a share of their ex-spouse’s pensions and retirement accounts. However, by ignoring retirement funds during divorce, ex-spouses could find themselves in an unenviable financial position later on in life.
The issue of retirement funds is particularly important when it comes to gray divorces, meaning those divorces involving older married couples. Between 1990 and 2000, for example, the divorce rate doubled for couples older than 50, and these divorces bring with them a set of issues that differ substantially from other types of divorces.
As Marketplace recently reported, for example, marriages involving seniors are more likely to have one spouse who acts as the homemaker while the other one provides the income. As a result, divorce in later life can leave the homemaking spouse without much in the way of financial security or job prospects.
Dividing retirement funds
What is especially worrying is that many people who are coming out of long-term marriages are unaware that they have rights when it comes to additional financial security. For example, a survey found that 31 percent of people who were divorcing after at least 10 years of marriage did not know they could claim a share of their ex-spouse’s retirement funds. Because retirement funds acquired during a marriage are often considered the property of both spouses, a spouse often has a right to the retirement funds even if the funds are in the other spouse’s name.
Experts also say that even spouses who are aware they can claim retirement funds often forego such funds in favor of acquiring the house the couple owned. While such an approach may seem logical, since the property is often the most valuable asset a couple has, people should keep in mind that such property value is subject to fluctuations in the housing market. Additionally, taxes and costs associated with property maintenance often mean that dividing retirement funds is a better choice when planning for long-term financial security.
Legal advice and divorce
The issue of retirement funds and divorce is a reminder of why it is so important for divorcing spouses to have the assistance of a qualified family law attorney throughout the divorce process. An experienced attorney can help clients through the divorce so that the marital property is divided in such a way that the client is adequately provided for well into the future.