Dividing retirement assets in gray divorce

On Behalf of | Sep 28, 2023 | Divorce |

Gray divorce, or the dissolution of marriages among couples aged 50 and older, is becoming increasingly common. One challenge these couples face is the division of retirement assets.

While it may seem daunting, with careful planning and communication, gray divorcing couples in New Hampshire can navigate this process fairly and amicably.

Understand the types of retirement assets

It is important to comprehend the various types of retirement assets you and your spouse have accumulated over the years. These can include 401(k) plans, Individual Retirement Accounts, pensions and Social Security benefits. Knowing what is in your financial toolbox will help you make informed decisions.

Get a valuation

Before you can divide retirement assets, you need to know their current values. Seek professional assistance or use online calculators to determine the worth of your retirement accounts. This will provide a clear starting point for negotiations.

Consider a Qualified Domestic Relations Order

A QDRO is a legal order that helps in dividing retirement assets, such as 401(k) plans and pensions, without incurring tax penalties. It allows for a direct transfer of a portion of the assets from one spouse to the other. This can be a useful tool in gray divorces.

Opt for an IRA rollover

In cases where you have a joint IRA account, consider rolling over your share into your individual IRA. There are ways to do this without incurring taxes or penalties.

Negotiate Social Security benefits

While you cannot directly divide Social Security benefits, you can discuss strategies to maximize benefits for both parties. Seek guidance on timing and eligibility to ensure you both receive your fair share.

Create a detailed settlement agreement

Once you have reached an agreement, document it meticulously. This should include the specifics of how you will divide the retirement assets, timelines for execution and any associated tax implications. Having a clear settlement agreement can prevent disputes in the future.

Update beneficiary designations

About 16 million people 65 and older in the United States live alone. Many of these people have gone through a divorce. After your divorce, be sure to update the beneficiary designations on your retirement accounts. Failing to do so can result in unintended consequences should one spouse pass away.

Gray divorcing couples may find mediation or collaboration beneficial. These methods emphasize open communication and cooperation, helping you arrive at a fair retirement asset division arrangement.