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Gray divorce can derail retirement plans
Gray divorce can derail retirement plans

Gray divorce can derail retirement plans

On Behalf of | Dec 19, 2023 | Divorce |

Divorce processes that start near or after one’s date of retirement are challenging, partially because there are usually so many assets to divide. For many, the end of a long marriage takes time, so there’s a lot of untangling to take care of.

One of the primary impacts of a divorce at this age involves retirement accounts. If both parties each have a retirement account of equitable value, each account holder may simply walk away with that account. In the absence of that convenient scenario, retirement accounts generally need to be divided.

Effects on retirement accounts

Dividing the retirement accounts requires a valuation to ensure everything is divided equitably. Qualified retirement plans, such as 401(k) and pension plans, require a qualified domestic relations order for division so certain penalties aren’t assessed due to the division. This specialized court order includes specific division instructions that the plan administrator must approve. Other retirement plans, such as an IRA, use a transfer incident to divorce for division.

Returning to work might be necessary

The retirement accounts meant to support one household will have to support two. This may mean that one or both parties must return to work to keep up with a lifestyle similar to the one they’re accustomed to. This could be only temporary, but some find it takes a while to recoup the money that they’ve lost during divorce.

The division of retirement accounts is only one aspect of gray divorce that must be considered. Other assets and debts must be divided, but there usually aren’t minor children, so child custody isn’t likely to be a consideration. Seeking legal guidance from someone who is familiar with grey divorce may make the situation less stressful.


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