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Can 'gray' divorce alter your retirement plans?

The old adage, "when it's over, it's over," could even be applicable to marriages that are decades old. With changing societal values, the United States is seeing a lot more "gray divorces," or marriages splitting up after many years -- often when the children have left the nest and a couple has simply grown apart.

Statistically speaking, since the 1990s, the divorce rate among those aged 50 and over has pretty much doubled. If you find yourself in this situation and you and your spouse started saving for retirement early in your marriage, a divorce can definitely put a damper on spending your golden years on a beach far, far away.

Many things to consider

You and your ex will probably divide those retirement funds you've amassed over the years. Suddenly, retirement becomes a bit more complicated. Moving forward with divorce, if you don't consider your financial future, your retirement years could become less than stellar. Here are some points you may want to remember as you consider dividing your retirement funds:

  • The IRS will expect payment for taxes and possible penalties if you fail to appropriately transfer the funds in an IRA.
  • Your divorce decree must specify the IRA division for consideration as a "transfer incident to divorce."
  • Dividing non-IRA retirement accounts will more than likely require a Qualified Domestic Relations Order, or QDRO. Without one, any funds you transfer to your ex will be taxable income to you.
  • After the divorce, you may want to update any beneficiary designations on the account.

Be careful not to divide any IRA or other retirement accounts until after your divorce is final. Otherwise, the IRS could still consider any transfer as taxable income; and, you could face early withdrawal penalties as well.

How adult children and aging parents can affect the situation

Even if you have adult children, ending your marriage may still affect them. Studies show more adult children are moving back in with their parents. These "boomerang" kids as they're known may make finances even tighter. If you're in the middle of a gray divorce, you may also be caring for your elderly parents, which can also be financially stressful.

A little brightness in that gray

With some careful financial planning, you will still be able to enjoy your retirement years as a newly single individual. In addition, a Texas lawyer who is experienced in family law may be able to assist you by answering your questions regarding your divorce, and your retirement, making it easier for you to plan a new life as you move into the future.

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