Gray divorce in Michigan and its potential effect on retirement
It is not uncommon to hear that a couple has decided to separate. However, what may be surprising is that many divorce after 20 or more years of marriage.
A research paper released this year by the National Center for Family and Marriage Research at Bowling Green University termed this trend as gray divorce. The paper points out that in 2010, over 600,000 people over the age of 50, divorced. Some of these were second and third marriages but many were first-time marriages that simply didn’t last. In the 10 years covered by the study, there has been a sharp increase each year and the trend is projected to continue.
Not surprisingly, the study also states that people who are in second or third marriages are more likely to divorce than couples in their first marriage. The reasons for this trend are not defined but there are some factors that could play a role such as:
- Economic independence for women
- Divorce is more commonly accepted
- Longer life spans
- Desire for personal fulfillment and happiness
- Attitudes of individualism
The study makes it clear that there is insufficient recent information to determine the actual cause for older couples entering single life.
One of the unique challenges for older people going through divorce is how that divorce will affect their retirement according to USA Today. Retirement plans are often considered marital property and this means that each spouse likely has a claim on the 401(k)s and IRA accounts, regardless of whose name they may actually be under. A retirement plan that was designed to support the couple will now have to support two people with separate lifestyles and living expenses.
In many cases, retirement is going to cost a divorced couple more. This means that people counting on retirement may have to make adjustments to their plans or work longer. Adjustments may include having to live in a smaller home, cutting travel plans, eliminating eating out and avoiding giving money to adult children.
Dividing Retirement Funds
One of the most complicated aspects of dividing marital property is how to split retirement funds. According to Fox Business, the biggest problem is taxes if the retirement funds are not separated correctly. Each type of retirement account has different rules attached to it and if a couple is not careful, they could find themselves penalized by the government.
One way that people can avoid these issues is to simply set up a new retirement account under their own name and then have retirement funds transferred. Even then, if the transfer is not handled in an appropriate manner, tax fees could be applied. In such matters, it is important for spouses to seek the experience of a knowledgeable attorney.