Gray Divorce: Divorcing During Your Golden Years
Divorce among seniors may not be talked about as much, but it is more common than you would imagine. Stepping into retirement, you may find time on your hands, but you may also discover that you and your partner have drifted apart. With the children long flown from the nest, you now have the independence to make this decision to live out the rest of your days as you desire. Here’s what you need to know about divorcing in your golden years.
Worries about your 401(k) and other retirement plans become more immediate when you go through a divorce after retirement. Be sure that your divorce attorney is familiar with working on QDROs or Qualified Domestic Relations Orders. This separate court order deals with how retirement benefits are split during a divorce.
Be sure to involve your retirement plan administrator so you fully understand the terms of your plan. Learn about tax penalties as well as breaks on these penalties, check on survivor benefits and whether those hold even post divorce, find out if you can take a hardship withdrawal when needed, whether you have entitlements on contributions made post divorce, and get clarity on other specific concerns you might have. For civilians that had a spouse who served in the military, also find out if the military retirements benefits you had been getting when you were married will continue as part of the Survivor Benefit Plan.
Don’t forget to check if your spouse has loans on the 401(k) that will need to be paid off before the funds can be split.
With things like Social Security, the rules are fairly clear cut, with details available on the SSA website. For marriages that are 10 years or over, where the surviving spouse is 60 plus, and the survivor’s own retirement benefits are lower than their spouse’s, they become eligible to receive survivor benefits of 100% against their ex’s Social Security benefit. While both partners are alive, for those aged 62 and up, you are eligible to get as much as 50% of your ex-spouse’s benefit without impacting their benefits.
Divvying up proceeds from the sale of the family home or deciding which spouse gets to keep it can play out differently when you’re 50-plus. As you grow older, you get certain tax breaks from the government which could be a game changer. Exclusions from gains when you sell the home, as well as deductions on mortgage interest will also be critical factors when you’re a senior.
You also could potentially earn rental income by letting out your home, if you choose to move into a smaller place or a nursing home. After 62, you become eligible for a reverse mortgage that can get you an additional income stream. For anyone qualifying for receiving public benefits like Medicaid, having a primary residence works in your favor.
Getting divorced in California can be complicated. Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.