Nowadays, more couples are throwing in the towel on their long-term marriages and enduring a so-called “gray divorce.” In fact, according to the Pew Research Center, divorce rates among people over 50 have doubled since the 1990s. While their actions may be in the best interest of both spouses, this type of divorce can cause well-thought-out retirement plans into chaos. However, careful financial planning can decrease or even prevent financial fallout. Here’s what you can do to keep your divorce from ruining your retirement.
Get a Clear Picture of Your Financial Landscape
It’s always helpful for people to understand their financial landscape clearly. Sometimes, it’s critical, and divorce is one of those times. If you are facing a divorce later in life, you definitely need to sit down and get a really clear picture of your debts, income, and overall resources. Be clear and concise to ensure that everything is up to date. Create a detailed list of all assets and income streams and maintain up-to-date documentation. Just taking this step can simplify much of the process of sorting out the finances and making sure you can still comfortably retire after your divorce. You won’t know what you have to work with until you take this step.
Enlist Expert Help
Once you know what your financial picture is, enlist the help of experts. At a minimum, the help should include an experienced divorce attorney and a wealth advisor if you don’t already have one. Both of these professionals can explain what types of retirement assets can easily be divided equitably in a Maryland divorce and which ones might need to be split or accounted for in other ways. For example, some types of military retirement accounts can be challenging or even impossible to split 50/50.
Consider the Tax Implications of Your Options
Remember, even in a divorce, nearly all financial decisions come with tax implications. For instance:
- If paying alimony, it is no longer tax-deductible.
- If receiving alimony, you don’t pay taxes on it.
- Selling your home can result in a rather large tax bill.
- Splitting investment accounts can mean selling, triggering various tax consequences.
- If you will be distributing funds to different accounts, consider if you will have a bigger lifetime tax bill with a brokerage account or the retirement plan.
Again, a wealth advisor can be helpful in figuring out tax issues for gray divorce. For example, there can be additional tax or other implications that you are failing to consider in the big picture of your divorce that can make a significant difference in the funds you are left to retire with after your divorce.
Be Willing to Be Flexible
When divorcing spouses can work together to settle their divorce on the best possible terms, typically, both receive a better outcome and are happier. It’s not about winning or being right. It’s about determining what areas you are willing to give a little so that you can get a little more in other areas of higher importance. Perhaps you care less about money in a certain retirement account and more about keeping the family home. Maybe your spouse wants to keep your vacation home but is willing to part with a large portion of their 401k to do so. An attorney can help you determine what is most important to you to help reach a settlement that’s a win-win for both sides.
Questions About Divorce and Your Retirement? Contact a Reputable Maryland Divorce Attorney Today
Suppose you have questions about divorce as it pertains to your retirement funds and plans. In that case, it’s in your best interest to reach out to a reputable Maryland divorce attorney as soon as possible. They can help you understand your situation and protect your rights.