Divorce at any age comes with challenges, but when you have less time to rebuild financially, it can be downright scary.
When a marriage ends near or during retirement, the consequences can be significant. Understanding how a gray divorce may affect your financial future is essential to protecting the retirement portfolio you’ve worked hard to build.
The unique financial risks of gray divorces
Gray divorce, the term used to describe divorces involving people over 50, is becoming increasingly more common. But these older individuals have challenges that younger couples don’t face, including:
- Fewer working years left: Older adults may already be retired or only a few years away from retirement. That means there’s only a limited time to recover from the financial impact of dividing assets in the divorce.
- Healthcare and living costs: Many people rely on their spouse’s employer-sponsored insurance unless they’re eligible for Medicare. A divorce can force one spouse to obtain coverage, possibly at a much higher cost. Combined with managing household expenses on a single income, it can leave a spouse struggling to make ends meet.
- Limited job possibilities: A newly single spouse in their 50s or 60s may struggle to find employment that allows them to enjoy their pre-divorce lifestyle and budget.
New Hampshire is an equitable distribution state, which means marital property is divided fairly. Pensions and retirement accounts such as 401(k)s and IRAs are typically considered marital assets. If both spouses have similar portfolio values, they may agree to keep their own retirement investments in the divorce settlement.
However, it’s not unusual for one spouse to be the primary breadwinner and have substantially more money in their retirement funds. The judge may issue a Qualified Domestic Relations Order (QDRO), which allows the accounts to be split without penalties. Additionally, if one spouse has a limited work history, they may be eligible to claim Social Security spousal benefits based on their ex-spouse’s earnings record if they were married for at least 10 years.
If you’re facing a gray divorce, it’s critical to be prepared. You need to gather all your financial records, including investment and savings statements, Social Security estimates and mortgage information. You must also assess your future expenses, including healthcare, housing, food and other daily needs. Work with a legal professional who can help you understand your rights and protect your financial future.
