How Will a "Gray Divorce" Affect My Retirement Plans?

 Posted on August 01,2024 in Divorce

Getting a divorce can be a challenging process at any age, but when you choose to end your marriage later in your life, you may face a unique set of financial concerns. In what is known as a "gray divorce", you will need to consider how the division of your marital property and other decisions you make will impact your retirement plans. An experienced divorce attorney can help you address the sometimes fairly complicated legal and financial issues that you may encounter in a "gray divorce", and can advise you on the best steps to take to protect your future.

Financial Concerns in a "Gray Divorce"

"Gray divorce" refers to the increasing trend of couples aged 50 and older choosing to end their marriages. If you are in this demographic, and you are either approaching or are already in your retirement, the financial implications of divorce can be significant. Financial concerns that you may need to address include:

Retirement Assets

Savings accounts such as 401(k)s and IRAs that you have contributed to over a long marriage may be among the most valuable assets you and your spouse own. The funds in these accounts will need to be divided equitably, along with other marital assets.

Pension Plans

Determining how to allocate pension benefits can be a somewhat complicated process. Decisions about how these benefits will be divided depend on the specific terms of a pension plan, how long you were married while earning pension benefits, and other factors.

Social Security Benefits

Older people often rely on the payments they receive through Social Security after retirement. Depending on each spouse’s income and employment history, a spouse may be able to receive Social Security benefits based on an ex-spouse’s earnings.

Healthcare Costs

Older people often face increased healthcare expenses, and losing a spouse's employer-sponsored health insurance can lead to higher out-of-pocket costs. Understanding the options that are available, including Medicare coverage, can help ensure that a person will be able to cover their ongoing medical expenses.

Preparing for Retirement After a "Gray Divorce"

Getting a divorce later in life will require careful planning to ensure that you will be able to maintain financial stability during your retirement. Here are some tips on how you can address these concerns during the divorce process:

Reevaluate Your Financial Goals

You may need to adjust your budget to reflect your new financial situation. Account for changes in income, expenses and savings contributions. You will also want to evaluate all potential sources of retirement income, including Social Security, pensions and personal savings. By understanding how your divorce will affect these income streams, you can make sure you will be able to provide for your needs going forward.

Consult Financial and Legal Professionals

A financial advisor can help create a comprehensive retirement plan and investment strategy post-divorce. Tax professionals can help you understand the tax implications that will accompany asset division and to optimize your tax strategies. Your divorce attorney can work in conjunction with these professionals to ensure that you will be able to make the right decisions during the divorce process.

Update Legal Documents

You may need to make changes to different estate planning documents, including updating your will, powers of attorney, and any beneficiary designations to reflect your new marital status. It is also important to review and update life insurance and health insurance policies as needed.

Maximize Social Security Benefits

If you were married for at least 10 years, you might be eligible for spousal benefits based on your ex-spouse’s work record, which could provide higher payments than your own benefit.

Contact Our Oak Park, IL "Gray Divorce" Attorney

As you address the issues involved in a "gray divorce", you will want to take steps to secure your financial future. To receive guidance on these critical matters, and make sure you are represented by a top-quality divorce attorney, contact the Hillside, IL "gray divorce" lawyer at the Law Office of Vincent C. Machroli, P.C. today. Call us at 708-449-7404 to set up a free consultation.