Divorce isn’t a fun topic at any age, and, it sure is not something most people anticipate as they happily stroll down the aisle while envisioning the years of marital bliss that lie ahead. Sometimes real life intervenes, and “happily ever after” isn’t always meant to be. Things turn ugly with sharp words and accusations hurled – soon thereafter is talk of splitting up, or divorce. Reconciliation may occur, but statistics show that only a mere 15% of all separations result in renewed marital bliss, and do not lead to divorce or reconciliation within ten years. Those aren’t very good odds for the remaining 85% of couples, who at least believed their marriage was important enough to try to salvage.
Sentimentality aside, once the jeers and tears have gone away, the reality of divorce sets in. Among the topics to consider going forward, is how retirement assets will be divvied up between the two partners. Divorce can really take its toll, emotionally and financially, but the later in life it occurs, the greater the threat to retirement. If you are getting divorced in your latter years it would be wise o consult with a top financial advisor in NJ. A New Jersey financial advisor will be able to help you go through the process in the least painful way.
The term “gray divorce” was first coined in the United States in the early 1980s, but was not an everyday term until around 2004. The “happily ever aspect” for Baby Boomers is not the norm any more, and, some researchers point out that because of human longevity, new cultural values of Baby Boomers, as well as women’s increasing financial independence, have all created this gray divorce syndrome. In an article on April 24, 2015 in “U.S. News & World Report”, it was stated that the divorce rate among couples 50 years and older was on the rise, citing a study by Bowling Green State University sociologists which found gray divorces have doubled from 1990 to 2010. Sadly, on average, the divorce rate drops 23% for men and nearly double that for women, and, even if there was diligent planning insofar as retirement savings, having to split up the “pot” and make alimony payments and pay household expenses, will surely not only derail the monies that were counted on as eventual nest eggs, but retirement age may have to be deferred, or worse, a part-time job will have to be put in place post-retirement. The audacity of having to put an austerity plan in place as you reach the “Golden Years” is almost too much to bear, along with the emotional aspect of the actual divorce.
In the case of longstanding marriages, often a judge will take into consideration, when one spouse, who never entered the workforce during the pendency of the marriage, is now suddenly left on their own; the judge will order a substantial amount of alimony to be paid so that that remaining spouse will be able to sustain the lifestyle accustomed to. This is especially true in the case of a spouse who has either chosen to forsake a livelihood or career of their own in order to be a homemaker and the primary caretaker of the couple’s children, or, if they have worked industriously as the primary breadwinner while their spouse was in continuing education for a more lucrative career. It is hardly fair for these spouses to not be remunerated for their selfless efforts in either event. Likewise, sometimes rehabilitation alimony is rewarded, so that the remaining spouse may be able to begin training for a new career for the eventual goal of supporting themselves.
Dividing up the assets equally may seem fair and equitable to the spouse who has never worked – after all, they subscribed to the “… for better, for worse, for richer, for poorer …” sentences spoken in their marriage vows. The parties, through their counsel, make decisions as to bank accounts, the marital home and its furnishings, or personal belongings acquired during the marital relationship. But, what if you are not ready for retirement, thus those long-term assets i.e. all the retirement funds which are not ready produce dividends without tax repercussions? Should the fund be disbanded and monies divvied up now with penalties, or wait? Let’s see what a top financial advisor suggests.
If you’ve not consulted with a financial advisor in the past, now is the time to hunker down and work out a plan for assets now in place, retirement assets and all financial planning going forward. It is important not to let the emotions of a divorce steal the good judgment and diligent efforts you’ve made throughout the working years, to provide adequately for the next phase of your life – retirement.
Sell the house and downsize thus giving you a chance to cut your housing costs and boost your retirement income. If you were empty nesters, then the space is no longer needed anyway. If the home is aging, face it – there will always be those ongoing maintenance costs or unexpected expenses, and, who knows how the neighborhood will fare in a just a few more years and maybe the home will decrease in value? Whatever savings are gleaned from the sale of the marital home will be split with your ex-spouse and the funds you gleaned from the sale can be put toward retirement.
Consider taking early Social Security benefits at age 62 (once you reach that age), thus adding to current income, and a portion of that money may be funneled directly to a long-term retirement plan.
Analyze your 401(k) as soon as possible because the divorce decree states how the assets are to be divided, but, if a 401(k) is part of those financial assets, ensure you know how it is invested, and whether your ex-spouse has the ability to borrow from it, until a new account can be put into place. Remember: it is crucial to put a separate account in place for any 401(k) or private-sector pension plan.