Divorce among the baby boomer generation is more common now than ever before. According to the National Center for Family and Marriage Research, divorces among married couples 50 and over doubled from 1990 to 2014. Over the same period, divorces among couples 65 and older tripled. Divorce among older couples has unique challenges. One important issue that older divorcees face is divvying up retirement accounts. Older Americans have a smaller window to earn after they divorce, so retirement accounts are a commonly fought over topic.

How Are Retirement Investments Divided?

Regardless of who saved more, retirement accounts are often split evenly, or close to it, when a couple divorces. Attorneys say that in a large majority of divorce cases, retirement accounts are considered marital property, and funds that were saved up to support one household must be divided to support two individuals. “There are a number of people who say ‘I have socked away every month and I do not see why I have to divide it with my spouse,” says Joslin Davis, former president of the American Academy of Matrimonial Lawyers. “The law says ‘too bad.’”

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

It is a very common scenario for a couple to divorce after putting a retirement plan in place. What many do not realize, however, is that certain instruments are not divisible under the sole authority of a divorce decree. Many retirement accounts require an instrument referred to as a Qualified Domestic Relations Order (QDRO). It is important to be aware of which assets may require a QDRO, as failure to appreciate this necessity could have severe tax consequences.  

Definitions and Terms

Some retirement instruments may be divided or disbursed under the terms of your divorce decree. The most common example of these would be an Individual Retirement Account (IRA). An IRA is an investment account usually opened by an individual or small business to hold the proceeds of other assets such as stocks or mutual funds. However, most accounts or instruments that are specifically designed for retirement must be handled through the use of a QDRO. The QDRO may be addressed in the divorce agreement, but the relevant asset cannot be disbursed via the divorce agreement itself.