Five Significant Financial Risks of Gray Divorce
By Duncan E. White, Owner
Inkpointe Divorce Solutions, LLC
So, your spouse is leaving after all these years? Such is the reality of a gray divorce. It can be emotionally and financially draining at any stage of life, but it can be especially difficult for retirees. A divorce among retirees can be particularly complicated due to the unique financial issues that arise.
Here are some of the financial challenges that come with divorce among retirees:
Retirement Accounts and Pension Benefits
One of the biggest issues that come up in a divorce among retirees is dividing retirement accounts and pension benefits. The division of these assets is governed by federal law, specifically the Employee Retirement Income Security Act (ERISA). This means that it is important to work with a financial professional who is familiar with ERISA and can help you navigate the complex rules surrounding the division of these assets. Be sure to understand what a pension is worth by getting it valued properly. This one of the biggest mistakes I see during gray divorce situations.
Social Security Benefits
Social Security benefits can be a source of contention in a divorce, especially if one spouse was the primary earner. In most cases, the spouse who was the primary earner will be entitled to a larger Social Security benefit, but the other spouse may be entitled to a spousal benefit. The rules governing Social Security benefits can be extremely complicated. As a result, it is imperative you get the proper help to understand what options you have available during the negotiation phase.
Another issue that often arises in a divorce among retirees is healthcare. If one spouse was covered under the other spouse’s health insurance plan, they may lose their coverage after the divorce. This can be especially concerning for retirees who may have health issues that require ongoing medical care. It is important to explore all options for healthcare coverage and work with a qualified professional to find a solution that works for you. You’ll have access to COBRA, but it is expensive and only lasts for 36 months. You’ll need a plan to figure out your future coverage.
Real estate is often a major asset in a divorce, but it can be particularly complicated for retirees who may have downsized or moved to a new location. It is important to work with a real estate professional who can help you navigate the local market and find a solution that works for you. I suggest seeking the help of a Certified Divorce Lending Professional (CDLP®) if you are considering a mortgage in your own name. They bring invaluable expertise to the table when trying to navigate the mortgage process!
Divorce can also have significant tax implications, especially for retirees who may be relying on their retirement savings for income. It is important to understand the tax implications of your divorce settlement. A qualified financial advisor who has a history of working with gray divorce can help you plan for the future.
The divorce process can be difficult at any stage of life, but it can be particularly complicated for retirees. It is important to work with a qualified financial professional who is familiar with the unique financial issues that come with divorce among retirees. Seek the advice of a Certified Divorce Financial Analyst (CDFA®) for solid guidance during this tricky time of life. With the right support, you can navigate this challenging time and come out on the other side with a secure financial future.
Afterall, it’s your future. Find quality professionals that can help you take control of it!
Duncan E. White is a Certified Divorce Financial Analyst (CDFA®) and has been a licensed financial advisor since 2010. He leads a Second Saturday Divorce Workshop each month for the benefit of those seeking information about the divorce process.
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. LPL Financial and Inkpointe Divorce Solutions do not offer tax, legal or mortgage lending services or advice.