Divorce poses unique issues for older couples that they would not necessarily have faced when they were younger.
Couples who divorce later in life often have significant assets they must split during property division. Does this mean that your spouse can take half your retirement income?
A little background
Later-in-life divorce is not uncommon these days. According to the Pew Research Center, divorce for people aged 50 and older has almost doubled from the 1990s. People are living longer and some empty nesters decide to pursue new beginnings once the children are out on their own. Finances, however, can be a concern, and many people about to divorce wonder if they have to split retirement accounts down the middle.
Need for a QDRO
Some pensions and retirement accounts such as a 401(k) require a qualified domestic relations order, or QDRO, confirming your right to either a portion or all of the proceeds of a plan. This is a judicial decree, which will go to the plan administrator for distribution. A QDRO is not required for an IRA. The divorce decree should detail the division of this asset and the information submitted to the IRA custodian. While there may be an equal split of a particular retirement account, the court will more likely make a “fair” split depending on certain elements of the divorce.
Tax implications
If you worry about a fair division in the retirement accounts on the table, your divorce attorney will help you understand how such a split will work in your particular circumstances. Remember that rules are different for different types of accounts. Also, having a complete understanding of the potential tax consequences will help you make decisions that will further your goal of financial security.