Divorce has become more common and more socially accepted in our country. More people than ever choose to end their marriage via divorce and doing so incurs significantly less social stigma than it once did. People who may have, at one time, stayed together for the children or the convenience of an existing marriage may now consider splitting up.
This means that more people at or near retirement age divorce than in the past. Now, a gray divorce may have many impacts on retirement account and assets. These impacts could leave you scrambling to adjust your expectations and make up the lost savings. Understanding the potential financial impact of a gray divorce can help you better plan for your fresh start and future.
Your assets are likely subject to division in a divorce
Alabama seeks a property division outcome that is equitable and fair to both parties. Generally, that means splitting up all marital property acquired during the years of your marriage. As a note, equitable doesn’t innately imply an equal split of assets. Among the assets often subject to division are retirement savings.
Any amount you had saved prior to your marriage may remain separate property, depending on how you handled your accounts. However, deposits made during your marriage are most like going to end up split by the courts. Regardless of who made more money or whose name is on the account, the courts will try their best to divide the possessions and debts from your marriage fairly between both spouses. This may mean splitting your retirement fund or pension.
You might have less to live on during retirement than you planned
Obviously, splitting your retirement account or pension with your spouse could mean that you will have fewer financial assets for the duration of your retirement. The expense of obtaining a divorce could compounds the reduction of your overall assets.
If you and your spouse can’t agree on the terms of your divorce, you could face lengthy and expensive divorce court hearings. You may have to liquidate certain assets, dip into savings or even cash out some of your retirement account just to pay your share of the costs associated with a divorce. When you combine that outpouring of funds with the division of your savings or pension, it could create a financial problem. So how divorce issues are addressed can matter for individuals coming up on retirement age.
Thankfully, the sooner you realize that there could be an issue, the more proactive you can be about addressing it. Deciding to work for a few extra years or scaling back your living arrangements and travel plans might help shore up your retirement after a gray divorce. Also, there may be actions you can take within your divorce proceedings to support your goals regarding the future and retirement.