People often look forward to their retirement for years. Even professionals who love their careers want to spend more time with their loved ones and pursue passion projects. Saving assertively for retirement helps ensure that older adults can live comfortably on a fixed income in their golden years. If older couples grow apart over time or realize that they have conflicting priorities, a gray divorce may loom large on the horizon.
The idea of living independently and having total control over lifestyle choices during retirement can be an exciting prospect. However, people may also fear the financial challenges that could follow a divorce, especially one that is classified as “gray.”
What steps can older adults preparing for a gray divorce take to minimize the loss of their retirement savings?
1. Keep the divorce as amicable as possible
The longer marriages have lasted, the more frustration and resentment may have developed between the spouses. People might take a very acrimonious approach to gray divorce, but doing so can ultimately cost them more. Attempting to settle matters amicably outside of court is usually more cost-effective than litigating. Couples often have to dip into their savings to cover the cost of divorce, so controlling expenses is a smart move for those concerned about financial stability in their golden years.
2. Focus on specific property division priorities
Spouses generally have to compromise to reach fair arrangements for the distribution of marital property. If one spouse hopes to retain a 401(k) or similar account, they may need to give up their interest in other assets. Spouses who set clear financial priorities early in the divorce process can then focus their energy on achieving those goals during the divorce process. Instead of arguing over every asset, maintaining a focus on long-term financial goals is often a better strategy.
3. Divide accounts using the right tool
In some cases, the division of a retirement savings account is necessary. If spouses must split a 401(k) or similar account, they may need a lawyer to draft a special document. A qualified domestic relations order (QDRO) allows for the division of a retirement savings account without any tax consequences or financial penalties.
Preserving retirement resources during a gray divorce can be possible with the right approach to the process. Spouses who hope to achieve specific property division outcomes may require support as they work toward their goals, and that’s okay