How Will Divorce Affect Retirement?
Although the general population usually thinks of retirement as something that married couples will enjoy together, research shows that many retirement-age couples are splitting up. Nicknamed “gray divorce,” divorce over age 50 has doubled in frequency since the 1990s. Older couples split up for a variety of reasons. Sometimes the stresses of finances and taking care of the house get the better of a couple, other times, infidelity ends the marriage, and sometimes, a couple simply does not wish to be married anymore.
Gray divorces like these are particularly complicated. When a couple in their 20s gets divorced, they are usually not as financially established as an older couple would be. Couples in their 50s and 60s often own their home and vehicles and have more valuable assets. One of the biggest concerns for older individuals who divorce is how divorce will affect their retirement. If you are considering divorce, you should be aware of how divorce will affect your retirement and how to plan for these unexpected disturbances.
Dividing Retirement Accounts
As a married person, you likely planned on sharing your retirement with your spouse. You would not only share a home, but also expenses, medical insurance coverage and long-term care. As a single person, you will be responsible for these expenses on your own. Because Illinois is an “equitable distribution” state, marital property is divided fairly but not necessarily equally. If a spouse pays into a retirement account or pension during the marriage, at least part of that retirement account or pension is considered marital property. Even if only one spouse's income was paid into the account, both spouses have claim to some of the funds in retirement accounts.
Managing New Expenses
Another factor which divorcing individuals must keep in mind is how a divorce will change their income and expenses. If there is a large discrepancy between the incomes and earning capacities of each spouse, one spouse may be required to pay spousal support or maintenance. If the couple still has children under age 18, the noncustodial parent may have to pay child support. If the divorcing couple has two spouses who work outside the home, a divorce will significantly reduce household income. Some individuals stop deferring a portion of their salary into a 401(k) plan or other employer-sponsored plan because they no longer can afford to do so. More of their income must go toward living expenses first.
Someone who divorces later in life may be forced to work longer because their divided retirement savings are not sufficient for them to retire at the age they had hoped for. The older a person is when they divorce, the less time they have to replace retirement savings which were divided in the divorce.
Let Us Help
If you are getting divorced and worried about how the divorce will affect your future, the dedicated Kane County divorce lawyers at The Law Offices of Douglas B. Warlick & Associates are ready to help. Call us today at 630-232-9700 for a confidential initial consultation.