Divorce involves discussion and compromise on many financial issues in the short-term: property distribution, alimony and child support, in many cases. For older people; however, a financially secure retirement should rank as a top concern. Divorce rates among older Americans doubled during the last 25 years. Factors such as age, how your state divides property, and calculating your retirement savings determine the extent to which a divorce can reduce your retirement.
Younger couples, especially those with children, may not feel that retirement is an issue during a divorce. Community property states, such as California, separate property based on whether money was earned before or during the marriage. It may be tempting to take cash prior, which could lead to lost income and increased taxes.
QDRO: A long-term option
People rarely use the legal option available to individuals, a qualified domestic relations order (QDRO), which provides clarity and comfort to long-term issues. Filed with a state domestic-relations court, this document details how divorcing spouses will their 401(k)s. As of 1 year ago, 401(k)s represented one-fifth of the value of the all the assets in the U.S. retirement market.
California: An aging population
Data from the California Department of Aging suggest retirements will increase in California over the next several decades. Specifically, population of those over 60 will 166% between 2010 and 2060, an increase of three times faster than the total population. Twenty-four counties, including Los Angeles County, will experience growth rates at more than 150%.
Every relationship matters during a divorce. Each decision will affect, to some degree, your financial future. As retirement approaches, an attorney with an understanding of all issues relevant during a divorce can guide you.