The divorce rate is rising most rapidly among the 50+ age group in the U.S., and financial experts are advising boomers to look at tax and retirement consequences when creating a favorable settlement for both parties. Here are some tips:
Create a financial plan – focus on long-term planning versus short-term gain. The last several years have had a dramatic impact on a lot of boomer’s assets, and one of the biggest concerns for divorcing boomers is if there will be enough to support both spouses. Before negotiating a settlement, understand what you need to take care of yourself now and in the future.
Create a budget – list the expenses necessary to maintain your current lifestyle as a single person to get a realistic picture of your new budget. Evaluate your income and spending habits and, if possible, work with your soon-to-be ex to come up with equitable goals.
Protect yourself – be on guard against a spouse cleaning out accounts or taking a loan against assets. You can set up an alert with your bank to advise of any changes in account status.
Think strategically – often, splitting assets like retirement accounts and pension plans equally is not the best strategy. Divorcing boomers need to consider the pros and cons of keeping each asset; keeping the house may be a sentimental choice but could end up being a foolish financial decision.
If both spouses are already retired, you need to approach the division of retirement assets with care. There are several decisions to be made, such as how any loans against retirement accounts should be repaid, whether or not there will be survivor benefits for one ex-spouse if the other dies first, and more.
While Social Security benefits are not subject to division in a divorce, there are some rules that will affect post-divorce income. For example, you cannot collect benefits on your ex-spouse’s record after a divorce unless the marriage lasted more than 10 years and you are over age 62. If your ex-spouse dies, you may be eligible for survivor benefits (100% of your ex’s benefits) provided the marriage lasted 10 years, you are at least 60, and you are not already entitled to benefits equal to or greater than your ex-spouse’s benefits.
Health insurance is also a concern for those divorcing late in life. If you were covered by your ex’s employment insurance, you can continue to be covered for up to 36 months following a divorce, but you will be responsible for paying your premiums. If you lack employer-provided insurance and don’t yet qualify for Medicare, you will need to find your own individual health insurance and this can be very pricey in today’s complex marketplace. You will need to have a firm grasp on those expenses before executing a final settlement.
When you are faced with an important life decision regarding a key family relationship, the advice and assistance of an experienced family law attorney often proves crucial to your understanding of the issues involved and your satisfaction with the ultimate outcome of your family law matter. Contact us today for your free consultation.
