Virginia residents may have heard that divorce among older couples is soaring. A study by the National Center for Family & Marriage Research found that the divorce rate among people over the age of 50 doubled between 1990 and 2014. Divorces tripled for people over age 65 during the same time period.
The end of a marriage can be an unsettling event at any age, but it can be especially scary for older individuals, who may have limited earning capacity going forward. A survey by the American Academy of Matrimonial Lawyers found that older couples most commonly fight over alimony and retirement accounts. Therefore, experts recommend baby boomers take steps to protect their assets.
One of the first things people facing the end of a marriage should do is review the beneficiary forms of their retirement accounts and make changes if needed. Another important consideration for retirement accounts is tax penalties. For example, withdrawals from 401(k)s and IRAs are taxed, but Roth IRAs are taxed when contributions are made. Therefore, retirement accounts should be divided based on their after-tax value. Experts caution that individuals shouldn’t necessarily be tempted to accept property, such as the family home, in exchange for retirement accounts. Homes are expensive to maintain, and maxed-out retirement accounts could have much more value. Starting over is difficult for people in their 50s and 60s, so keeping a retirement account could be critical to financial survival.
One of the more challenging aspects of a divorce is the property division phase. Virginia is an equitable distribution state, which means that judges will divide property between the parties in a manner which they deem to be fair. However, this does not necessarily mean equal. As a result, the parties may want to have their respective attorneys negotiate a settlement agreement that they might be more satisfied with.
Source: CNBC, “Memo to divorcing boomers: Watch your assets,” Jessica Dickler, Sept. 9, 2016