Dealing With a Divorce During Retirement
Divorce in New Jersey can happen at any age or in any stage of life. While many people associate divorce with younger couples, the reality is that divorce rates have stabilized across the United States for people of most ages. The exception comes in for Americans over the age of 50; since 1990, the divorce rate in this demographic has more than doubled.
Divorce Rates
People today are living longer, healthier lives than ever before. Since 1950, the average life expectancy for both women and men has shot up by more than 10 years. This means that there’s little reason for people to stay in unhappy or unhealthy relationships simply because they are aging. In addition, incompatibilities that have existed for years in a relationship can become even more apparent as the nest empties; when children leave the house and a couple has more free time, they may become increasingly aware that their relationship isn’t a happy one.
When you’re considering divorce later in life, you may be aware of the financial repercussions that can come with the 
end of a marriage. These repercussions can be particularly concerning when you choose to divorce close to retirement age or when you’re in a long-term marriage. However, our Hackensack divorce lawyer can advise you about how you can complete your “gray divorce” and go on to a happy, healthy, and secure retirement.
What About Retirement Funds?
Retirement funds are often the largest single asset held by a couple, and they can even outweigh the value of the marital home. This is especially true for couples who have a true “gray divorce” after 20 years of marriage or more. This means that retirement accounts will usually be divided in the divorce. While both members of the couple may have intended to retire on the sum in those accounts, now they will need to do so separately. The costs of maintaining two households with the same sum of money can be far greater than those of maintaining one home.
There are a number of types of retirement accounts that can be affected by a divorce. Among the funds that will be divided in a divorce settlement are the following:
- 401(k) plans
- 457 or 403(b) accounts
- IRAs, or Individual Retirement Accounts
- Government or employer pension plans
For people in long-term marriages, retirement accounts may be divided nearly in two. This is especially true when both partners were relying on one retirement fund. When people over 50 divorce after shorter marriages, the effects on each person’s retirement accounts may be far less profound, depending on the financial changes experienced during the marriage.
How Is the Distribution Made?
In many cases, dividing a retirement account properly requires a QDRO, or a Qualified Domestic Relations Order. This order is issued by the court and allows tax-restricted retirement accounts to be divided without a tax penalty. The specifics of the QDRO will be laid out in the divorce agreement, but the order itself must be drafted and requested from the court by your Hackensack divorce lawyer.
If you try to transfer the funds from a retirement account without a QDRO, this will generally be assessed as a taxable distribution. It’d important that the QDRO itself be precise and specific in order to avoid any errors or problems with the distribution.
An Individual Retirement Account is one type of retirement fund that doesn’t require a QDRO to distribute after divorce. However, IRA divisions must be specified in the divorce decree as transfers incident to divorce. In addition, the transfer must be executed as a trustee-to-trustee exchange only after the divorce is final in order to avoid tax penalties.
What About Social Security?
In most dual-income families, both partners have their own Social Security income to supplement their retirement. However, if one person has largely been a homemaker, he or she may have little Social Security funds of his or her own. If you were married for more than 10 years prior to the divorce, then you could claim half of your ex-spouse’s Social Security benefits instead of your own benefits. This will have no detrimental effect on an ex-spouse’s own income, but you can only choose one source of Social Security.
Contact Our Office
If you’re considering divorce and you want to know more about how it may affect your retirement plans, then call the Law Office of Kelly Berton Rocco in Hackensack today at (201) 343-0078. We return all calls and emails within 24 hours. You can schedule a free 30-minute telephone consultation to discuss your next steps.
