Protecting Your Retirement In Divorce

As older Americans divorce in larger numbers, protecting retirement is important

As Time recently reported, the divorce rate among older Americans has been skyrocketing in recent decades. Today, one-in-four divorces are described as a "gray divorce" because they involve at least one spouse who is over 50. The fact that so many older Americans are divorcing is leading to growing concerns about what happens to pensions and other retirement funds during divorce. While retirement funds are often considered community property in Texas, soon-to-be ex-spouses should be aware that such funds are treated differently from other types of marital assets.

Gray divorce takes off

Experts say that compared to just 20 years ago, people 50 or older are twice as likely to divorce today. Furthermore, while the high divorce rate can partly be attributed to people on their second or third marriages making the decision to divorce, about half of these gray divorces actually involve a long-term first marriage. Those figures are in spite of the fact that divorce has been declining or holding steady for younger couples.

Explaining the trend has proven difficult. Some of the most common explanations include the fact that people are living longer, that women are more able to financially support themselves, and that divorce is less taboo today than it was just a couple generations ago.

Prepare for retirement

The prevalence of gray divorce, however, does bring up important concerns about retirement plans. It is no secret that divorce can prove expensive, especially if complications arise as they often do when a couple tries to divide an estate that has been built up over decades. One of the biggest concerns for older couples is what happens to retirement funds, such as pensions, IRAs, and 401(k)s.

In most cases, a spouse has a right to a share of his or her former spouse's pension regardless of whose name is on the pension itself. However, as USA Today points out, many people make the mistake of assuming that a court will simply enforce the division of retirement funds similarly to other marital assets. This is not the case. In most divorces, a Qualified Domestic Relations Order (QDRO) will be necessary to transfer retirement funds from one spouse to another and can also prove helpful in avoiding high taxes and penalties.

Seek legal advice

Retirement funds are also complicated by other factors, such as who the provider of a pension plan is, as well as by unique Texas laws governing community property. These complications make it vital for older individuals who are considering divorce to reach out to a family law attorney today. An experienced attorney is often the key to ensuring that a divorce runs smoothly and that a client's best interests are properly represented when it comes to dividing a marital estate.