Divorce may be an emotional experience for some, but it is the financial aspect that could continue to affect the parties for years to come. When those parties are older, divorce may create some unique situations for some. When divorce and retirement collide, you may need to take into consideration a few extra precautions. Read on to learn more.
Be Aware of Limited Income
Many of those already retired or approaching retirement are stuck with a fixed income situation. Many people continue to work well into their retirement age but illness and a desire to take it easy may interfere with working plans. Whatever situation applies to you, keeping an eye on your future is vital. Take a look at the following suggestions for ensuring you protect yourself during divorce:
- Be aware of debts. How debts are divided depends on the state you live in. You should, however, make sure that you and your spouse pay off any joint debts before you divorce, if you can.
- Ask for support. You may be entitled to spousal support (alimony). To get spousal support, you will need to show that you earn considerably less than your spouse and have little ability to rectify that situation.
- Know what your marital assets are. You and your spouse may make your own agreement, but you should understand what you are entitled to receive in a marital property settlement. Speak to your lawyer about uncovering marital assets that could be partly yours.
Does Your Spouse Have a 401(k)?
If so, you might be entitled to some of it using a qualified domestic relations order (QDRO). This type of order is only available in the period between when you serve divorce papers and the final petition. While a QDRO is not actually part of your divorce proceedings, it is closely aligned with it. A QDRO presents a spouse with a unique opportunity to take some of the other spouse's retirement account. A retirement account is considered marital property (in most states) and can be divided between the parties. If you perform the QDRO before the divorce is final, you can take the money from the fund without having to pay the usual interest or penalties. You must, however, roll those funds over into your own account before tax time to avoid paying taxes on what is considered income.
Who Gets More From the Social Security Administration (SSA)?
If your spouse has made more money, chances are they are in line for a higher retirement check each month. If you have been married for at least 10 years, you might be entitled to take one-half of that monthly allotment. You cannot, however, get two allotments. The SSA will automatically pay you the higher of your allotment or one-half of your spouse's.
Speak to your family law consultant about the unique aspects of later-year divorces.