When people think of retirement, most likely won’t include divorce in their plans. However, for many older Americans, divorce is becoming increasingly likely.
While a gray divorce will have an impact on your finances, it doesn’t need to completely upend your second act.
Dividing retirement accounts
Gray divorce refers to couples aged 50 and older who have decided to divorce after decades of marriage. Younger divorcing couples have more working years to recover financially, but those nearing retirement age must make immediate changes.
As married couples near retirement, their most significant marital assets are likely their 401(k)s, IRAs, real estate and other long-term investments. This holds true even if one spouse contributed more financially while the other spouse was the primary caretaker of the home and children.
Georgia courts will aim to divide these investments in a way that is equitable based on factors such as the length of the marriage and each spouse’s financial needs and earning capacity. The court must provide a Qualified Domestic Relations Order (QDRO) so that money can be withdrawn from certain retirement plans and paid to the non-account-holding spouse. Failure to secure a QDRO can result in early withdrawal penalties. In addition to asset division, one spouse may be awarded alimony to help balance any financial disparities.
Another unique challenge among older couples is healthcare costs. If one spouse was covered under the other’s health insurance and isn’t yet eligible for Medicare, they can find themselves scrambling and paying a high premium to secure coverage.
A gray divorce typically requires a reassessment of retirement plans and a downsizing of your lifestyle. Transitioning from a dual-income household to a single-income one as you head into retirement will significantly impact your living expenses. This doesn’t mean you have to give up on your retirement dreams. Your second act is about experiencing all the things you put on hold while raising a family and building a career. For example, more people are discovering the joy of traveling solo. It’s crucial that you work with someone who can guide you through your gray divorce and help you get what you’re entitled to.
