The divorce rate in the U.S. is declining for every age group except one: those over 50. This wave of “gray divorce” can be particularly harmful to divorcing couples that have to split retirement accounts and other assets with not too many years left before retirement to make up the shortfall. Don’t compound the problem by making any of these 10 common mistakes:
Failing to know your finances. It’s not unusual for one spouse to know more about a couple’s finances that the other spouse. If you are the spouse who needs to get up to speed, be sure you make a comprehensive list of all your assets before proceeding with a divorce.
Keeping the house. Even if you are awarded the home in the final settlement, think hard about keeping it. You will have to pay for everything on your own now, so it might be a better idea to sell it, take the equity, and find yourself a new place.
Not knowing how much debt you have. You could be on the hook for half of jointly held loans and credit cards, so get a clear picture of your debt as a couple by pulling a credit report.
Being unprepared for a tax hit. Work with a financial advisor so you fully understand the tax consequences of the decisions you will make when you divorce.
Overlooking health insurance. If you have been covered on your spouse’s health plan, you may get an expensive surprise once you’re no longer married. You do have a few options: get coverage from your own employer, obtain coverage under Obamacare, or keep your ex’s coverage through COBRA for up to three years (but you have to pay the premiums).
Doing an IRA rollover with your ex’s retirement account. Once the retirement account assets are split up, you should protect your share with a QDRO (qualified domestic relations order), which allows you to withdraw your share from your ex’s 401(k) without having to pay a 10% tax. If you fund your own IRA directly with your share of the retirement account and withdraw funds before age 59 ½, you will be hit with a 10% early withdrawal penalty.
Hiding assets. It may be tempting to hide assets, especially if there is a significant sum at stake, but doing so could not only jeopardize your case, it could also trigger a court’s decision to award the assets your tried to hide to your ex.
Miscalculating expenses. Creating a monthly budget for your household and living expenses is a good idea, so you have the complete picture of what changes you may need to make in order to cover those expenses after the divorce.
Supporting adult children. Your first priority should be to protect your retirement income, no matter how much you’d like to help your adult children financially. There are loans for college and business startups; there are no retirement loans.
Not getting the right kind of support from the right people. While your divorce attorney and financial advisor will be doing their best for you, remember what you need them for. They are professionals you are paying, and you’ll be paying them more than necessary if you try to use them as a therapist or friend.
At Cistaro Law, we are not only concerned with your divorce today, but also with your quality of life long after your case is over. Your family law issues deserve to be managed with dignity and respect. You can prepare to civilly resolve your divorce, heal, and move on with your life with a legal team that has helped individuals all over New Jersey to heal and prosper. Contact us today for your free consultation.
