Many Michigan residents may not be aware that the divorce rate in the United States is declining. In one particular demographic, however, the divorce rate is skyrocketing. In a phenomenon known as gray divorce, the divorce rate for couples over the age of 55 has risen dramatically in recent years. Going through a divorce late in life can greatly affect retirement plans. Here are some ways to get through a gray divorce while safeguarding retirement nest eggs.
Retirement accounts
It is required by law that IRAs and 401(k)s have just one account owner. However, funds that go into these accounts during a marriage arguably belong to both spouses. With 401(k) funds, a qualified domestic relations order (QDRO) will be necessary to divide the funds without tax consequences. In an IRA, the best way to move these funds between spouses is with a direct rollover, as this method will usually be tax-exempt.
Social Security
In a late-life divorce, the handling of Social Security benefits is dictated by law and usually not open to interpretation. If the spouses were married for at least 10 years, a former spouse can apply for monthly Social Security benefits worth up to half of the higher-earning spouse’s total benefit. Also, this ex-spousal benefit does not affect the benefit of the higher-earning party. Additional requirements apply.
Those who are about to go through a late-life divorce should get a clear understanding of their finances and become familiar with state divorce laws. Luckily, there is help readily available for anyone in Michigan who needs help with any aspect of divorce. By speaking with a knowledgeable attorney, those who are going through the dissolution of a marriage can obtain much-needed legal guidance while ensuring their personal rights and interests are protected.
