The pandemic has prompted surges in divorce filings, particularly among the recently married. Still, the group that has seen the largest increase in recent years are those who fall into the category of divorce over the age of 55.
There are some unique issues for couples in this category, including explaining the change to grown children and grandchildren. Financially speaking, the biggest concern is determining how best to protect a nest egg and other retirement plans. Due to the length of the marriage, the number of marital assets is likely to be substantial, making the division of these assets quite complicated. Moreover, the stakes can be relatively high since spouses may have a limited ability or amount of time to meet their financial goals before hitting retirement age.
Common mistakes to avoid
The circumstances surrounding each divorce are unique, but some financial experts believe certain measures can reduce the economic damage for most:
- Consult an attorney prior to keeping the house: Houses are typically safe investments, and couples may have paid off the mortgage of the place where they raised their kids, but large homes can be expensive to maintain with a substantial tax burden. It may make smarter fiscal sense to get a larger share of the IRA or 401(k).
- Avoid retirement fund penalties: Taking money out of some retirement accounts early can incur a serious tax burden, but some (like a Roth IRA) allow withdrawals.
- Do not roll all money from one retirement account to another: Those 59-and-one-half or older may have a one-time opportunity to take out money from an ex’s 401(k) or 403(b) without paying 10% in penalties, which can help pay expenses incurred during and after the divorce. The funds must be in accordance with the qualified domestic relations order, which is sometimes used to divide retirement benefits.
- Do not take too much out of retirement accounts: It is good to have a healthy balance in a bank account but taking out money so it can sit in a lower-interest bank account may not make sense.
A family law attorney can help avoid these mistakes
Each couple’s financial circumstances will vary, so it is often best to work with a lawyer experienced in handling divorce here in Connecticut. These legal professionals can help avoid these and other missteps that couples can ill afford as they approach their golden years.