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Protecting retirement assets during a "gray" divorce

With the divorce rate in America hovering at 50 percent, chances are good that you or someone you know may face divorce. No one wants to experience divorce, but it is a good idea to prepare for and guard yourself against adverse financial situations. As you age, it is important to understand and know how to protect your retirement benefits. For couples over the age of 50, it is unlikely that you will have to battle over custody, but you could find yourself fighting to retain ownership of your 401k.

Research indicates that during the decades between 1990 and 2014, divorce among people aged 50 and older more than doubled. Divorce among younger age groups declined. Based on research by the National Center for Family and Marriage Research at Bowling Green State University, older couples that once would have celebrated silver or golden anniversaries are divorcing at increasing rates. One cause for this may be longer life spans and the associated desire to live happily ever after in retirement, even if that means divorce. However, those who divorce later in life run the risk of damaging their retirement savings.

Calculating and dividing retirement assets

It is important to know what your spouse's financial situation is prior to initiating divorce proceedings. It is also important to note that while divorce and division of assets are usually handled at the state level, division of retirement benefits is governed by federal law. Specifically, many retirement assets fall under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986.

What does this mean to you? Basically, it means that retirement assets cannot be simply divided in a divorce decree. Instead, you will need to obtain a qualified domestic relations order, or QDRO. It is important to discuss your rights and QDROs with your attorney if you have an employer-based or private retirement plan.

Navigating the murky financial waters during a divorce can be daunting at any age, but seniors are particularly vulnerable to adverse financial outcomes. Be sure to talk to your attorney about your rights under federal and state divorce laws and asset division. However, be sure that you know what your spouse has in terms of assets. Far too many spouses find out when it's too late. Protect your own assets now through financial planning.

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