How Divorce Affects Retirement Planning for Seniors
In 2011, the American Community Survey revealed that more than one in four people who reported a divorce in the previous twelve months were over the age of 50. Divorce is growing more common among adults in their senior years, and if you're a senior facing divorce, you're probably discovering that the issues you face are somewhat different than the issues faced by younger divorcing couples.
For example, while child custody is a major divorce issue generally, it's often not a big consideration for seniors, since their children are often already adults. On the other hand, finances can be considerably more complicated when retirement is taken into account.
Take a look at some things you should know about the financial aspects of divorcing in your golden years.
If your spouse is or will be eligible for Social Security retirement or disability benefits, you may be entitled to benefits as well, even after you divorce. In order to be eligible, you need to have been married for 10 years or longer, be 62 or older, and unmarried. Also, your benefits on your own record have to be lower than the benefits you would get from your spouse.
If you meet all of the eligibility requirements, you can receive one-half the amount of your spouse's retirement or disability benefits after your divorce. This doesn't affect the amount of money that your spouse receives. If you get remarried at some point after your divorce, you will usually no longer be able to collect benefits. If, after your divorce, your ex-spouse becomes eligible for Social Security retirement benefits but doesn't apply for them, you can apply to receive them on your own as long as you've been divorced for at least two years.
Non-governmental retirement funds can be somewhat more complicated, but if your spouse has a retirement savings fund, a 401k, or a pension from an employer, you may be entitled to a portion of those funds as well.
How much you'll receive depends partially on which state you live in. If you live in one of the nine community property states (or Alaska, which allows you to opt-in if you want your marital belongings to be community property) then you're entitled to half the retirement funds accumulated during the marriage.
Keep in mind that this doesn't apply to any funds accumulated prior to marriage—those are considered your spouse's property only. For example, if your spouse maintains a retirement account that has $10,000 in it at the time of the divorce, but the first $2000 was deposited before you were married, you would be entitled to half of the $8000 accumulated during the marriage, not half of the total $10,000.
The states that are not community property states follow what's called equitable distribution in divorce cases. That means that you're not necessarily entitled to half of the retirement funds (though you can make that argument in court) but that the courts do have to divide property fairly. So, a court may decide that you're owed less or more depending on the circumstance. For example, a judge could order that you get the house to live in or sell without having to share the proceeds with your spouse, but that you only get 20% of the retirement funds.
If a judge decides that you're entitled to part of the retirement money, the court will issue a Qualified Domestic Relations Order (QDRO) that allows you to collect funds from that account.
Understanding what benefits you're entitled to and what you're likely to receive after a divorce can help you plan for your retirement during or after a divorce. Consult a divorce attorney who has experience handling senior divorces for legal advice that meets your needs.