Content: Episode 98 of the Divorce and Your Money podcast discusses ways to protect yourself when getting divorced after age 50. As life expectancies increase and attitudes shift, divorce over 50 is becoming much more common. There are some unique financial considerations for people getting divorced later in life
Here are four tips to guide you:
1) Choose the right method. Typically, you have more money later in life. Therefore, you have more money to spend on attorneys. Attorneys will eat through your money if you let them, and it can make your divorce more contentious.
Therefore, consider alternative methods of getting divorced:
Mediation Hire a mediator to help you talk out the key issues with your spouse. The actual mediation might last a day or two, and it tends to keep costs down. However, you and your spouse can still hire attorneys.
Collaborative Divorce The goal of collaborative divorce is to keep you out of court. This method tends to reduce conflict and be more efficient than litigation.
2) Financially prepare. My courses cover this method in-depth, so I will not go into all the details here. However, one issue to consider is whether your social security benefits will be affected by divorce.
If you have been married for at least ten years, you will have the option of taking your ex-spouse’s benefits. You may want to delay your divorce if you have not been married for a full ten years. For more information, see the Social Security Administration website (or my previous post).
3) Divide retirement assets the right way. Retirement assets are among the most complicated to split. Each type has different rules, complications, and tax concerns.
There are three broad categories of retirement plans:
Defined contribution plans Also called 401(k) and 403(b) plans, these specific contributions are made every year on behalf of your employer. How much you get during retirement depends on your investment performance.
Defined benefit plans (i.e. pensions) In these plans, you get a fixed amount of money after you retire.
Individual retirement accounts (IRAs) These plans are easy to split. You can usually just split them with a letter that specifies how much money goes to each person.
Splitting up a defined contribution or benefit plan requires a special legal document called a Qualified Domestic Relations Order (QDRO) . This document is complicated, so you need to get a specialist to put it together. The plan sponsor must approve the QDRO, and they may mandate modifications. Therefore, it is best to start this process early in the divorce.
4) Review your estate planning and medical coverage. These issues can cause an extraordinary amount of complications later in life. If you are getting divorced, you need to know how these issues will affect you.
Estate planning Wills, trusts, powers of attorney, and life insurance all fall under the umbrella of estate planning. There are specialists to help you with each of these areas.
Medical coverage As you get older, you will have more medical issues. If your current medical coverage is provided through your spouse’s employer, you will need to find an alternative after divorce. Medical coverage can be very expensive if you do not qualify for (or choose to use) Medicare, so you will need a plan .
Try to get divorced as efficiently as possible. Then you can save money and improve the odds that you can have a polite relationship with your ex, which can be important if you have kids. Think about how to optimize your life before retirement. The decisions you make right now can affect you for the rest of your life.
Thank you for listening to the Divorce and Your Money Show. Visit us at www.divorceandyourmoney.com for 1-on-1 coaching and be sure to check out the NEW courses Steps to Take Before Divorce and How to Get a Divorce without Losing Everything .
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